Russia offers carbon sink opportunities: Lukoil's Fedun
The world cannot reach net-zero emissions by 2050 without the use of CO2 storage initiatives, and Russia's vast forests and unused land offer carbon sink opportunities, Lukoil's vice president for strategic development, Leonid Fedun, said at an online season organised by the Moscow-based Skolkovo management school on March 25.
Russia has some 18mn hectares of forests and 15mn hectares of unused land that can be used by Lukoil and others to abate their emissions, Fedun said. The Russian oil company's long-term ambition is to supply fuels that have had their emissions abated.
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"Obviously this requires also developing a very transparent system that will be trusted by our international partners," Fedun said. "Indeed, the subject of climate is of extreme importance to us and we are going to be very active in this area."
Russian companies have made considerable progress in reducing the environmental impact of their operations. This was demonstrated when LNG exporter Novatek got its environmental, social and governance (ESG) score upgraded last year by US financial firm MSCI from BBB to A. ESG ratings are an increasingly important metric for investors. Lukoil, Russia's second biggest oil producer after state-owned Rosneft, still has a BBB rating. But while Russian producers have set targets for curbing their emissions, they have not committed to net-zero ambitions like their counterparts elsewhere in Europe.
"Right now we're looking at ways of decreasing our Scope 1 and Scope 2 emissions, and we are considering Scope 3 mitigation," Fedun said.
The board member, who is also a major Lukoil shareholder, said that as recently as a few years ago he had encountered significant scepticism about climate change at the oil company.
"Many people in the company were quite sceptical about climate change, people would often ask me, am I really serious about this because it means additional costs. After all, we are an oil and gas company. Why should we shoot ourselves in the foot," he said. "I had to expend quite a lot of effort to persuade my fellow board members that actually it is a global challenge and everybody needs to put in concerted efforts to deliver on the targets set in the Paris Agreement."
There has been an "explosive change" in attitudes towards climate change in Russian business circles, Fedun said. "We need to provide as much as the world requires with as small a carbon footprint as possible."
Lukoil is also implementing a system that considers the carbon footprint of new projects when assessing top managers' key performance indicators. The company, while mainly focused on oil, is also a significant gas producer, extracting some 29bn m3 last year. A significant share of this output comes from fields in Uzbekistan and is sold to China.