Approaches to managing climate change issues

During 2019, a notable progress was achieved in managing climate change issues at LUKOIL, a decision was made to integrate climate issues into LUKOIL Group’s Strategic Development Program.

MANAGEMENT SYSTEM

Management: Role of the Board of Directors

In 2019, outstanding work was performed to shape the Company’s position on climate change issues. Two meetings of the Board of Directors were held (16 October 2019 and 13 January 2020) to address these issues. The key GHG emission points, factors driving emission dynamics, as well as opportunities to reduce GHG emissions in the long-term were discussed.

In December 2019, three development scenarios for the global energy system and the Russian oil and gas industry for the period up to 2035 and 2100 in terms of climate change issues were presented“Major Trends in the Global Liquid Hydrocarbon Market to 2035” report. At the meeting of the Board of Directors held in January, Leonid Fedun, Vice President for Strategic Development of PJSC LUKOIL, presented a report on climate scenarios and global trends in the climate agenda.

The Board of Directors set medium-term tasks, implementation of which will guarantee that the Company makes a solid contribution to the achievement of the UN SDG 13 and the Paris Agreement’s goals. The tasks set includes the following among others:

  • determination of the projected GHG emissions reduction level, along with the scope and content of compensatory measures;
  • assessment of the impact of the climate change on production facilities and essential infrastructure, especially in vulnerable territories (the Arctic, permafrost), preparation of a list of facilities and territories falling within the scope of the assessment;
  • incorporation of internal mechanisms designed to mitigate harmful impacts on the climate, stress testing of investment projects in terms of external regulating measures applicable to GHG emissions.

Areas for action

LUKOIL Group’s Climate Strategy will build upon its current experience in delivering low-carbon projects comparable with similar projects implemented by the leading oil and gas companies.

Our ambition for the future is to satisfy our customers’ demand for energy resources, while significantly reducing GHG emissions and preserving financial stability.

APG utilization

Efficient APG use of 97.6% was achieved by LUKOIL Group entities in 2019. Further work in this area will involve the implementation of projects as part of the World Bank and UN initiative “Zero Routine Flaring by 2030.”

Reducing GHG emissions at oil refineries

At our oil refineries projects to reduce carbon dioxide emissions into the atmosphere either are or will soon be under way (see the following case study European oil refineries reducing GHG emissions).

Greater energy efficiency

Owing to the use of secondary energy resources and the development of our own cogeneration facilities, the Company’s production needs are satisfied with no increase in direct GHG emissions, with reduced volumes of purchased energy resources and reduced indirect GHG emissions. The average annual reduction in energy consumption for 2017–2019 amounted to approximately 5 million GJ. Potential for further reduction in energy consumption is based on the implementation of investment projects at oil refineries focused on construction, equipment retrofitting and upgrading, as well as improving the efficiency of power generation facilities.

Renewable energy sector

The installed generating capacity of renewable energy sources rose to 395 MW. The share of ‘green’ energy generated in 2017–2019 averaged 6% of total commercial generation. According to Company estimates, power generation from renewable sources helps prevent around 500 thousand tonnes of СО2E per year of GHG emissions. We are planning to proceed with RES projects both in Russia and abroad.

New areas

In addition to the areas noted above, we are seeking to utilize the most suitable CO2 capture and storage technologies (CCS and EOR), find solutions designed to reduce natural gas and CO2 emissions, and implement compensatory measures.