Energy conservation

Key changes and results in the reporting year
Energy consumption for production purposes is reduced on average by 1% per year for the period 2017-2019
Pilot projects for the construction of digital substations are being implemented
The Energy Intensity Index (EII) reduced by
3.5
as compared to 2014Since 2014, the list of organizations covered by the study has changed; the boundaries of the study, starting in 2014, did not change.
Management system

OUR GOALS:

WE VIEW ENERGY EFFICIENCY IMPROVEMENT AS ONE OF THE KEY FACTORS IMPACTING THE ENERGY INTENSITY OF PRODUCTS AND LUKOIL’S ABILITY TO ADAPT TO GLOBAL CLIMATE CHANGE. RATIONAL USE OF ENERGY RESOURCES ENABLES THE REDUCTION OF GHG EMISSIONS. ENERGY EFFICIENCY IMPROVEMENT PLANS WILL BECOME AN INTEGRAL PART OF THE CLIMATE CHANGE STRATEGY AND WILL BE PRESENTED IN THE STRATEGIC DEVELOPMENT PROGRAM.

Management system changes

Taking account of external environment changes and the introduction of many new technical solutions, in 2019 it was resolved to update the Technical Policy. The new version is expected to be completed in 2020.

As part of preparing for the re-certification of energy management systems of LUKOIL Group entities for compliance with a new version of the international standard ISO 50000:2018 “Energy Management System — Requirements with Guidance for Use,” five corporate standards were amendedSTO LUKOIL 1.20.1–2019 “Energy Conservation. Energy Resources Accounting System. General Provisions and Requirements for Equipping Production Facilities of LUKOIL Group Entities”; STO LUKOIL 1.20.3–2019 “Energy Conservation. Energy Audits of LUKOIL Group Entities. Methodology”; STO LUKOIL 1.20.4–2019 “Energy Conservation. Energy Efficiency. Constitution of Indicators for Entities, Processes, Structures and Production Facilities”; STO LUKOIL 1.20.5–2019 “Energy Conservation. Rates of Fuel Consumption, Heat and Power for Typical Processes and Production Facilities of LUKOIL Group Entities” and STO LUKOIL 1.20.6–2019 “Energy Conservation. Energy Management System of LUKOIL Group Entities. General Provisions and Regulated Facilities.”. The schedule of certifying LUKOIL Group entities according to this standard was approved.

The Set of KPIs was supplemented with a new indicator – “Delivery of the Approved Energy Conservation Program,” with reporting to be submitted starting in 2020. This indicator heightens the interest of senior executives in improving energy efficiency and energy conservation.

Further energy cost optimization plans include implementation of projects aimed at increasing the cost effectiveness and reliability of production facilities of LUKOIL Group entities. Significant new energy facilities are expected to be put into operation at fields in the Komi Republic; and two digital substations are being built in the Perm Territory.

Energy consumption structure

Oil and gas production companies account for the biggest share of energy consumption for production purposes across LUKOIL Group entities. Heat is primarily consumed by oil and gas producers, oil and gas refineries and petrochemical plants. Fuels are basically consumed by oil refineries, petrochemical plants and power providers.

Russian heat and power entities of LUKOIL supply electricity and heat to local communities and industrial enterprises in the south of Russia.

The oil refining complex ISAB in Italy operates an energy park composed of two blocks of combined cycle plants. In addition to natural gas, the energy park makes use of synthesys gas as fuel. Synthesys gas is produced by gasification facilities from asphalt generated as a by-product from deep oil refining. Electricity produced is mainly supplied to external consumers.

The oil refinery in Romania operates an energy park composed of a power boiler with the capacity of 185 MW and a turbogenerator with the capacity of 30 MW. The power boiler is made using the circulating fluidized bed technology that is the most advanced technology for solid fuel-fired boilers. Oil coke as a by-product of deep oil refining is used as a fuel. The power produced is primarily consumed for oil refinery process needs.

Targeted program

Russian entities run the Energy Conservation Program of LUKOIL Group entities aimed at improving the energy efficiency of power and fuel and at loss reduction. The program covers activities carried out in entities of each business sector. A dedicated group of projects of the highest energy efficiency potential is highlighted. Such projects are included in roadmaps. For example, 76 highly effective projects are scheduled in 2020–2022 focused only on refineries.

In 2019, program performance is achieved primarily by the following activities:

  • For entities involved in production, the key energy conservation activities include the replacement of asynchronous motors with magnet motors (PMSM), making use of electric submersible pumps as drives. Pumps of the system which maintain the formation pressure are also being upgraded.
  • Refineries carried out 132 activities intended to improve energy consumption and retrofitting.
  • Power plants replace and upgrade their process equipment in order to increase the efficiency factor and shift heat loads from inefficient boiler stations which will subsequently be closed.

A good example is the project of decommissioning inefficient boiler stations and shifting heat loads to the source of combined heat and electricity generation – at the Astrakhanskaya CHPP. Implementing this project will allow reduction in the volumes of burning non-renewable types of fuel by 7 million cubic meters of natural gas per year.

Results

Over the last three years, energy consumption for production purposes was reduced thanks to the completion of energy conservation activities.

The reporting boundaries cover entities of all business segments in Russia and abroad that involve energy consumption for production purposes. The oil refinery in Netherlands is excluded from these boundaries.

Energy consumption for production purposes of LUKOIL Group entities from non-renewable sources and procurement, million GJ
2017 2018 2019
Total energy consumption for production purposes, including: 497.5 489.3 487.5
  • purchased electric power for production purposes
64.1 61.9 58.7
  • purchased heat power for production purposes
35.7 19.9 17.4
  • boiler and furnace fuels consumption for production purposes
520.1 537.9 529.6
power sales and supply, including:
  • electricity
75.1 73.9 66.7
  • heat
47.3 56.5 51.5

Note. (1) Power consumption for production purposes by LUKOIL Group entities = Electricity and heat purchased for production purposes + Consumption of boiler and furnace fuel — Quantity of electricity and heat supplied to third-party consumers, as well as residential electricity/heat consumption. (2) The 2017–2018 data regarding power consumption for production purposes is different from the Sustainability Report for 2018 due to changes to the reporting boundaries, in particular, the addition of the Power Generation business sector to the reporting boundaries. Moreover, after publishing the 2018 Report, values of fuel and energy resources consumption for production purposes of LLC LUKOIL-Nizhnevolzhskneft for 2018 were amended. (3) The method to calculate indicators was improved: all inputs and estimates were converted into GJ. In this regard, the 2017–2019 data was re-calculated. When converting data, the following factors under GOST R 51750-2001 were used: 1 thousand kWh = 3.6 GJ, 1 Gcal = 4.19 GJ, 1 tonne of oil equivalent = 29.3 GJ).

In general, the dynamics of power consumption for production purposes are accounted for by several factors. For oil and gas production entities, the construction of our own generating facilities allows for reducing purchases of power – notwithstanding an increased extraction of hard-to-recover reserves (HTR reserves) in the West Siberia and high-viscosity crude oil in the Komi Republic (which requires more heat), as well as a rise in water cut of wells in traditional production regions of West Siberia (which increases electricity consumption required to lift raw materials). In 2019, the specific electricity consumption indicator of Russian oil and gas production companies was 20.5 kWh per tonne of fluid produced, which is lower than the 2017–2018 indicator (20.6 kWh per tonne of fluid produced).

At Russian and foreign refineries, energy efficiency activities result in a considerable improvement of power consumption indicators: EII decreased by 3.5 percentage points against the 2014 level.

The Solomon EIIThe EII index is calculated pursuant to the HSB Solomon Associated LLC methodology with the use of its own factors. is used to evaluate the level of energy efficiency of refineries. Solomon produces global surveys of refineries fuel and lube profile every two years (in even-numbered years), with the most recent one held in 2019 for 2018. In uneven-numbered years, LUKOIL performs its internal monitoring of key indices (including as part of setting and checking compliance with the efficiency factor); however, Solomon experts do not verify such results. The Report shows indicator dynamics only based on verified survey data.

Dynamics of Solomon EII as compared to 2014, %

EII is used for long-term planning and as the efficiency factor for the medium term (three-year plans for the development of corporate sectoral development programs). This indicator is also monitored on a quarterly basis. At the time of this Report, EII benchmarks for the sectoral development program for 2018–2027 were in effect.

In physical terms, the power saved is a significant resource for improving production performance.

Renewable energy (supporting generation) consumption for production purposes, million kWh

Note. (1) The 2018 data refers to LUKOIL Neftochim Burgas AD; the 2019 data — to LUKOIL Neftochim Burgas AD and PETROTEL-LUKOIL S.A. (starting from April 2019). (2) An increased consumption of power in 2019 was driven by the reorganization resulting in the transfer of the 9 MW solar power plant from S.C. LUKOIL ENERGY & GAS ROMANIA S.R.L. to PETROTEL-LUKOIL S.A. Starting from Q2 2019, this solar power plant supplies electricity for the operational needs of the refineries.

Power savings resulting from the implementation of the Energy Conservation Program of LUKOIL Group entities in Russia, million GJ
Specific power consumption at the refinery, GJ / tonne of manufactured products
2017 2018 2019
Total for LUKOIL Group, including: 3.6 3.7 3.5
  • Russian entities
3.7 3.7 3.4
  • Foreign entities
3.3 3.5 3.5

Notes. (1) Data for Russian plants is displayed subject to the volume of oil products supplied from other Group refineries in Russia for further processing. (2) Data is displayed subject to gas processing products (LLC LUKOIL-Permnefteorgsintez) and petrochemical products (LUKOIL Neftochim Burgas AD and ISAB S.r.l.). (3) Data on mini-refineries is not included in the calculation of indicators on specific energy consumption at refineries.

DIGITAL PROJECTS

The application of digital technologies in the power sector opens up prospects of an extension in equipment life, as well as better use of fuel and energy resources thanks to flexible management and improved forecasting. Expected effects include improved reliability and safety of the power infrastructure, reduced injury rates and decreased power grid losses. In 2020, LUKOIL Group expects to put into operation its first digital Chashkino substation with a rated transformer capacity of 32 MVA to service oil production facilities.