4.3. Climate Protection Measures

Documents regulating the Gazprom Group’s climate strategy:

• Long-Term Development Program of PJSC Gazprom;
• PJSC Gazprom’s Innovative Development Program until 2025;
• Environmental Policy of PJSC Gazprom;
• Energy Efficiency and Energy Saving Policy of PJSC Gazprom;
• Energy Saving and Energy Efficiency Program of PJSC Gazprom;
• PJSC Gazprom’s Integrated Environmental Program for 2020–2024;
• Roadmap for the Greenhouse Gas Management System at the Gazprom Group looking forward to 2030.

The Gazprom Group’s climate policy and strategy for managing GHG emissions and reducing man-made environmental impact are governed by international and national regulations and guidelines in the realm of energy efficiency, energy saving and environmental protection.

Reduction of the adverse environmental impact exerted by production facilities is one of the key goals outlined in the updated PJSC Gazprom’s Innovative Development Program until 2025.

To assess the results achieved, a variety of indicators is used, including the reduction of specific greenhouse gas emissions in CO₂ equivalent (KPI).

The gas business reported a target reduction in specific GHG emissions from 0.259 tons of CO₂ equivalent per ton of oil equivalent in 2019 to 0.239 tons of CO₂ equivalent per ton of oil equivalent in the reporting year, which was made possible thanks to the implementation of measures provided for by the Roadmap for the Greenhouse Gas Management System at the Gazprom Group looking forward to 2030 and the Energy Saving and Energy Efficiency Program of PJSC Gazprom.

The targets for 2031 (versus the reference level of 2018) are:

• 11.2% for PJSC Gazprom;
• 10.5 % for Gazprom Energoholding LLC.

The measures to reduce GHG emissions in 2020 were implemented in line with the Roadmap for the Greenhouse Gas Management System at the Gazprom Group looking forward to 2030 and the Energy Saving and Energy Efficiency Program of PJSC Gazprom.

The process losses of natural gas during production, transportation, processing and storage in 2020 were reduced through the renovation and comprehensive overhaul of equipment, application of advanced and innovative techniques to save gas during repair works, use of energy saving technologies, optimization of process flows in the gas transmission system facilities, use of pipes with smooth internal coating, etc.

Specific GHG emissions amounted to:Direct GHG emissions (Scope 1) were considered for the purposes of calculation.

• 29.564 kg of CO₂ equivalent per ton of reference fuel for companies engaged in hydrocarbon production and geological surveying;
• 119.144 kg of CO₂ equivalent per ton of reference fuel for processing companies;
• 107.595 kg of CO₂ equivalent per ton of reference fuel for gas transportation companies.

Direct GHG Emissions

All companies of the Gazprom Group perform control and accounting of GHG emissions. Since 2016, all Group subsidiaries regardless of their line of business 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 Federation.Approved by Order of the Russian Ministry of Natural Resources and Environment No. 300 dated June 30, 2015.

In 2020, GHG emissions of the Gazprom Group’s facilities (Scope 1) amounted to 210.3 mmt of СО2 equivalent, with 12.5% of them coming from methane. The 11% year-on-year decrease in absolute GHG emissions of the Gazprom Group came on the back of the renovation and comprehensive overhaul of equipment, application of advanced and innovative gas saving techniques during repair works (emissions in the amount of 8 mmt of СО2 equivalent were avoided due to the use of mobile compressor stations), use of energy saving technologies, etc. This corresponds to the climate target criteria established under the SBTi initiative within the CDP.

GHG Emissions Reduction Plans

Implementation of energy saving measures is estimated to help avoid 19.3 mmt of СО₂ equivalent of GHG emissions in the year 2021.

To keep stakeholders updated on emissions across the entire production chain, PJSC Gazprom discloses its energy indirect GHG emissions, i.e. GHG emissions resulting from the purchase of electricity or heat by an enterprise.

Since 2018, the Gazprom Group has been assessing indirect (Scope 3) GHG emissions resulting from the use of products as fuels or feedstock both in Russia and abroad. The calculation includes GHG emissions from all types of products sold — natural gas, oil, gas condensate, automotive gasoline, diesel fuel, jet fuel, LPG, and fuel oil.

In 2020, the carbon intensity of the Gazprom Group’s products burnt by end consumers was 301.35 kg of СО₂ equivalent per boe.

PJSC Gazprom, Gazprom Neft, Gazprom Energoholding and Gazprom Neftekhim Salavat do 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 of at least 95%.As per Resolution of the Government of the Russian Federation No. 1148 dated November 8, 2012.

In 2020, APG utilization was 98.2 % at the fields of PJSC Gazprom’s gas production subsidiaries (including Gazprom Dobycha Tomsk JSC), 91.1 %Taking into account long-term risk service agreements in force at the fields of PJSC Gazprom. across the Gazprom Neft Group, and 97.2 % at Sakhalin Energy.

The actual APG utilization at the operating facilities of the Gazprom Neft Group reached 91.1% in 2020, i.e. increased by 2.1 p.p. versus 2019, with the actual rise in APG production amounting to 1.3 bcm (+8%).

The Energy Saving and Energy Efficiency Program of PJSC Gazprom sets out key energy saving measures to be implemented and key fuel and energy saving targets to be achieved.The Program stipulates relevant measures for all types of activities with a view to enhancing (maintaining) the energy efficiency of production processes and reducing fuel and energy consumption, including by minimizing energy losses.

The 2020 Corporate Targets required reducing the consumption and increasing the savings of fuel and energy, as well as taking steps to prepare for the ISO 50001:2018 certification.

Implementation of the Energy Saving and Energy Efficiency Program of PJSC Gazprom in 2020 contributed to the fuel and energy savings of 114.8 million GJ (3,916,590 tons of reference fuel).

The Company also proved the compliance of its energy management initiatives with the existing standards: Bureau Veritas, an international certification body, has confirmed the conformity of PJSC Gazprom’s Energy Management System (EnMS) with the requirements of ISO 50001:2018.Certificate No. IND/20/9040/EN/U dated June 04, 2020, obtained.

The Energy Management System certification scope covers production and treatment of natural gas and gas condensate, transportation of natural gas, as well as power, heat and water supply to, and operation of, energy equipment at the facilities of the UGSS, and underground gas storage.

The targets set were achieved.

At Gazprom Neft, the Downstream and Upstream Divisions’ energy saving and energy efficiency programs helped save 2.8 million GJ of energy and 1 million GJ of electric power, respectively, in 2020.

Gazprom Energoholding uses specific consumption in terms of reference fuel for power generation as an industry energy-efficiency metric. In 2017–2020, the overall reduction in specific consumption in terms of reference fuel for power generation across Gazprom Energoholding amounted to 10.7 g/kWh, or 4%. Over the same period, specific consumption in terms of reference fuel for heat generation went down by 1.5 kg/Gcal, or 1%.

The total fuel savings due to changes in specific consumption in terms of reference fuel were reached owing to a higher share of combined heat and power output, and also streamlining of the equipment mix. The measures provided for by energy saving programs aim to reduce the consumption of fuel and energy resources (fuel, electric power, heat, water).

The cost of energy resources saved is RUB 6,580.7 million.

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

Plans for further savings in fuel and energy consumption

In accordance with the Energy Saving and Energy Efficiency Program of PJSC Gazprom for 2021–2023, there is a plan to further increase the efficiency of production processes, to ensure the total savings of resources in the amount of 9.3 million tons of reference fuel, to reduce specific consumption of fuel and energy resources (natural gas and electric power) per amount of gas transmitted (at least by 1.2% a year).

PJSC Gazprom expects to save fuel and energy in the amount of 3,183,500 tons of reference fuel in 2021.

⁽¹⁾ The information is obtained through corporate reporting forms approved by the relevant order of PJSC Gazprom on an annual basis. PJSC Gazprom’s Order No. 238 dated February 27, 2020 approved the following corporate reporting forms for 2020:
— 103-gas Fuel and Energy Efficiency Report of a Gas Transmission Subsidiary;
— 105-gas Fuel and Energy Efficiency Report of Underground Gas Storage Stations;
— 106-gas Fuel and Energy Efficiency Report of Gas, Gas Condensate and Oil Processing Entities;
— 107-gas Fuel and Energy Efficiency Report in Gas Distribution and Supply;
— 143-gas Fuel and Energy Efficiency Report of a Gas Producing Subsidiary;
— 142-gas Progress under the Energy Saving and Energy Efficiency Program;
— Rosstat Order No. 713 dated November 28, 2019 “On Approval of Guidelines for Completing Federal Statistical Monitoring Form No. 4-TER Details of Fuel and Energy Utilization”.

The key reasons behind the changes in the fuel and energy consumption in the reporting period are associated with initiatives aimed at fuel and energy savings within the Energy Saving and Energy Efficiency Program of PJSC Gazprom, as well as with the reduction of the gas transmission amount by 7.3%.

The reduced consumption of electric power is associated with a lower gas transmission amount and consequent reduction in the work load of the most energy intensive equipment, such as electric gas pumping units and air cooling units.

The reduced consumption of heat energy is due to favourable climate conditions in the reporting year.

The consumption of steam in key production operations of the Company is accounted for as part of natural gas consumption.

In 2020, Gazprom Neft’s energy consumption for internal needs totaled 257 million GJ (vs. 229.2 million GJ in 2019).

The amount of RES power consumption totaled 1,041,700 kWh (3,750 GJ).

In 2020, Gazprom Energoholding’s energy consumption for internal needs totaled 2.76 million tons of reference fuel (80.9 million GJ), vs. 4.8 million GJ in 2019 (140.85 million GJ).

The amount of RES power consumption stood at 4,000 tons of reference fuel (0.117 million GJ).

In 2020, Gazprom Neftekhim Salavat LLC’s energy consumption for internal needs totaled 68.02 million GJ, while the total energy consumption amounted to 84.03 million GJ. In 2019, the company’s energy consumption for internal needs stood at 66.25 million GJ and its total energy consumption amounted to 81.27 million GJ.

There was no RES power consumption.

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 output of products.

Since the technologies of production processes vary significantly for each type of activity carried out by PJSC Gazprom subsidiaries (gas production, transportation, underground storage, distribution and processing), each business activity requires an individual approach when setting specific energy intensity indicators which maximally reflect the specifics of each activity, making it impossible to consolidate them into a single indicator for PJSC Gazprom.

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.

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

The reasons behind the changes in energy intensity metrics in the reporting period, in addition to the initiatives envisaged by the Energy Saving and Energy Efficiency Program of PJSC Gazprom, are the changes in production metrics that have a non-linear relationship with energy consumption across the core activities.

In 2020, Gazprom Energoholding’s energy intensity totaled 1.64.

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.Calculation of the energy intensity ratio for Gazprom Neftekhim Salavat is unpractical due to product diversity, and is not envisaged by the reporting documents.

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. 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 2020, the Gazprom Group operated 2,573 secondary energy resources- and renewable energy sources-based power generation units (other than hydroelectric units), such as turbo expanders, thermoelectric generators, solar modules and batteries, and wind power generators. The total electric power generated by these power units amounted to 1,805.24 MWh.

The Gazprom Group invested RUB 21.6 million in alternative energy sources in 2020.

JSC Gazpromneft-ONPZ (the Omsk Refinery, part of the Gazprom Neft facilities) completed the construction of a 1 MW solar power plant (Phase 1). In 2020, the actual energy output of the plant stood at 1,041,700 kWh. A decision on the construction of a 20 MW solar power plant of the same type at the Omsk Refinery will be made in 2021.

Gazprom Neft produced 3,750 GJ of energy from renewable resources.

In 2020, Gazprom Energoholding made the following progress in developing green energy generation:

• a project to build a small-scale 16.5 MW HPP in the Murmansk Region was selected by competitive tender, with capacity supply agreements to be awarded on the basis of the bidding procedure. The HPP is scheduled to be put in operation in December 2024;
• in the reporting year, PJSC TGC-1 and Siburenergomanagement JSC signed the first non-regulated electricity sale and purchase contract, with green electricity to be supplied by the Lesogorskaya HPP located in the Leningrad Region.

The number of CNG filling facilities owned by the Gazprom Group and Gazprom Gazomotornoye Toplivo LLC increased to 348 (versus 318 CNG filling facilities in 2019), with their annual capacity amounting to over 2.6 bcm. CNG sales at filling stations increased by 8.1% to 842 mcm in 2020 (versus 779.2 mcm in 2019). In 2020, the Gazprom Group and Gazprom Gazomotornoye Toplivo LLC operated their CNG filling stations in 64 constituent entities of the Russian Federation.

In 2020, the Gazprom Group took part in the traditional international Blue Corridor project. The Gazprom Group, Uniper, and local partners such as Germany’s Zukunft Gas (Gas Future) industry group acted as the organizers. The Blue Corridor 2020 project involved both online and offline roundtables and panel discussions on topics relating to the high environmental efficiency of natural gas as a vehicle fuel, bringing together political and business representatives in Tallinn, Riga, Bratislava, Zagreb, and Rome. The possible use of other gaseous fuels with a zero carbon footprint, such as biomethane, bioLNG and hydrogen, was also covered. The focus on the climate agenda was placed as the European Commission considered the adoption of a new law in June 2021 to regulate СО₂ emissions in the European road transport segment.

NGV Market Development Plans

Gazprom Gazomotornoye Toplivo LLC plans to build 65 new gas filling facilities in 2021. PJSC Gazprom subsidiaries plan to put into operation 9 gas filling facilities at production sites.

By the end of 2023, Gazprom Gazomotornoye Toplivo LLC is set to build 285 gas filling facilities, including 55 along major federal highways as part of the Gazprom Group’s Federal Highway CNG/LNG Filling and Production Infrastructure Development Program.Order of PJSC Gazprom No. 447 dated October 28, 2020.

Hydrogen energy is now viewed by many countries as a key priority in their national low-carbon development strategies.

Potential applications of hydrogen as an energy resource:

• heat and electricity generation (and storage in the longer term);
• industrial use;
• transport sector;
• household use.

There was no global market for “energy” hydrogen in 2020, with this resource still used directly as a raw material or an industrial reagent. Neither was there production of hydrogen with low GHG emissions on an industrial scale. Implementing the use of hydrogen as an energy resource requires significant governmental support and a favorable regulatory environment.

At the same time, the share of hydrogen in the global energy may, by various estimates, be from 7% (IRENA) to 24% (Bloomberg NEF) by 2050 under different decarbonization scenarios in the world economy.

The global industry has already mastered various hydrogen production technologies, the specifics of which depend on both the raw materials used and the ways of generating energy. Among fossil hydrocarbons, natural gas is mainly used for the intended production of hydrogen. That said, hydrogen is a secondary energy resource, i.e. additional energy is required to produce it from water or hydrocarbons, which will always impact the cost of production.

Hydrogen produced by methane pyrolysis meets the low-carbon hydrogen criteria specified in the European hydrogen strategy and is one of the efficient solutions for achieving the EU’s short- and long-term climate goals.

Addressing topical issues related to hydrogen is an integral part of Gazprom’s activities, due to the environmental benefits of natural gas and its importance for the development of the global hydrogen market.

The Gazprom Group is working on the following scientific and technical initiatives to promote application of hydrogen as an energy resource:

1. Innovative technologies aimed at using methane-hydrogen fuel in production activities (to reduce the carbon and toxic footprint and increase the efficiency of gas transportation/supplies).
2. Innovative technologies aimed at producing hydrogen from methane without СО₂ emissions (e.g. methane pyrolysis) and with СО₂ capture and utilization.

Such technologies, when used extensively, could generate additional demand for natural gas as a raw material for hydrogen production, which is particularly relevant in the context of energy transition.

Pipeline exports of hydrogen-based energy carriers in the form of a methane-hydrogen mixture are currently not possible for a number of reasons:

• any addition of hydrogen to the gas transmission network would change the properties and price of exported gas, which could possibly trigger breaches of export contractual obligations, and would also require separate special certification of gas trunklines;
• the issues of process equipment integrity and industrial safety have yet to be addressed;
• there are no uniform regulatory and technical documents governing the pipeline transportation of methane-hydrogen mixtures either in Russia or in European countries.

Therefore, taking into account technical, economic, legal and environmental aspects, the best possible option would be to export natural gas with subsequent production of hydrogen or methane-hydrogen mixtures using low-carbon processes near end users (power generation facilities, steelmaking plants, etc.).

The Gazprom Group cooperates with foreign organizations in hydrogen energy, looking to expand the use of natural gas in the global energy market. In July 2020, its position that draws on the benefits of hydrogen production from natural gas was voiced to the European Commission in connection with the development of the EU hydrogen strategy.

Gazprom actively participates in consortiums, associations, coordination councils, framework programs, etc. on matters related to hydrogen production, storage, and use by the end consumer, as well as identification of priority areas for hydrogen technology development and implementation of joint projects to demonstrate the capabilities of natural gas during the transition to low-carbon energy. Hydrogen-related discussions are ongoing with Wintershall Dea, N.V. Nederlandse Gasunie, VNG, Uniper, OMV, KOGAS, Royal Dutch Shell, Linde, Engie, ThyssenKrupp, Japan’s Agency for Natural Resources and Energy, Mitsui & Co., Mitsubishi, Siemens, etc.

The Gazprom Group is continuously exploring options to further develop foreign operations concerning the generation and use of low-carbon hydrogen produced from natural gas.

Plans for hydrogen energy

In the medium term, PJSC Gazprom will participate in key pilot projects as part of the “Hydrogen Energy Development in the Russian Federation until 2024” government action planApproved by Resolution of the Russian Government No. 2634-r dated October 12, 2020.

To this end, a special-purpose company, Gazprom Hydrogen LLC, is being established to consolidate organizational, technological, human and intellectual resources.

The company will address the following focus areas:

• developing technologies for hydrogen production from natural gas without carbon dioxide emissions to be followed by the implementation of industrial hydrogen production projects;
• assessing in a comprehensive manner the impact of hydrogen on the integrity and stability of the gas supply system to determine the possibility of transporting methane-hydrogen mixtures, including the development of regulatory and technical proposals;
• producing and using methane-hydrogen fuel in gas turbine engines of gas compressor units and during electricity generation;
• building gas processing capacities that bring the quality of hydrogen-containing gas up to consumer requirements and creating the respective infrastructure for hydrogen storage and shipment at gas processing facilities;
• promoting in a comprehensive manner the benefits of natural gas in building a hydrogen economy to ensure non-discriminatory treatment of hydrogen produced from it.

There is continuing consideration of possible bilateral and multilateral cooperation, including in relation to standardization, with hydrogen producing and consuming countries such as Germany, Japan, Denmark, Italy, the Netherlands, South Korea, and others. PJSC Gazprom will continue to look for new business opportunities in the hydrogen energy segment.

The Gazprom Group companies actively follow the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in their strategic planning, corporate governance, risk assessment, and disclosures in terms of international and corporate reporting. The TCFD methodology enables holistic and comprehensive climate risk management.

The TCFD recommendations are currently integrated into the CDP questionnaire.

PJSC Gazprom disclosed the following information in the CDP Climate Change Questionnaire 2020:

• senior management’s involvement in climate risk management;
• use of scenario analysis in strategic planning;
• identification of both physical and transition climate risks;
• monitoring the performance against climate goals using special indicators.

In accordance with the TCFD recommendations, PJSC Gazprom voluntarily identifies and evaluates climate-related risks as well as discloses its decarbonization goals.

The Gazprom Group plans to integrate the TCFD recommendations in its activities on an expanded basis by taking steps aimed at decarbonizing production and increasing the share of investments in green technologies such as RES and hydrogen energy.

PJSC Gazprom identifies and assesses climate-related risks in two key areas:

• risks associated with the transition to a low-carbon development scenario (transition risks) such as changes in Russian and international legislation, decreased investment activity, investment policy revisions, etc.;
• risks associated with physical changes in the environment due to climate changes (physical risks) such as reduced climate predictability, more frequent hydro-meteorological hazards in the regions of operation, etc.

PJSC Gazprom develops adaptation technologies in cooperation with a wide range of scientific and production enterprises in related industries, small and medium innovative companies, as well as major foreign companies (in certain focus areas).

In 2021–2022, PJSC Gazprom will continue to work on elaborating sustainable development scenarios through 2050, taking into account the global shift to a low-carbon economy.

As part of this work, St. Petersburg State University of Economics together with the Institute of Economic Forecasting of the Russian Academy of Sciences is analyzing the role of natural gas compared to other energy sources in achieving sustainable development goals, assessing the synergies of expanding the use of natural gas and its annual contribution to reducing the Russian economy’s carbon intensity through 2050, taking into account PJSC Gazprom’s technological development forecasts.