Rosneft Sets out Climate Ambitions
Russia's Rosneft has presented a 15-year carbon management plan, which calls for a 30% reduction in upstream Scope 1 and 2 emissions intensity by 2035. It also wants to build up its natural gas business.
The company aims to prevent 20mn metric tons of annual CO2-equivalent emissions while also taking steps to address its existing emissions, which came to 81mn mt of CO2 equivalent in 2019, it said on February 26. It is also striving for zero routine gas flaring and wants to develop natural CO2 sinks.
Rosneft, like other Russian oil and gas producers, has been paying closer attention to their environmental credentials in recent years in response to pressure from investors and buyers. The company last month agreed to work together with its largest foreign shareholder BP on carbon management and sustainability.
Rosneft's energy efficiency programme is expected to play a major role in its carbon plan. It also wants to increase its associated gas (APG) utilisation, which came to 77.8% in 2019, buy renewable power and develop wind farms and blue hydrogen production. It could be able to cut annual emissions by a further 20mn mt using new but as yet unspecified technologies.
The company is embarking on a massive Arctic development, known as Vostok Oil, which it estimates could one day produce over 2mn barrels/day of oil. But it wants to use wind turbines to power the field facilities, and is targeting zero flaring right from the project's start.
Rosneft is also considering ways to tackle its Scope 3 emissions, resulting from the use of its products. The fact that Vostok Oil's crude contains minimal sulphur will help here, as it reduces the need for refineries to use hydrotreating, a CO2-intensive process.
Russia's forests can act as a sink for billion of mt of CO2, Rosneft said. The company has already planted 3.5mn trees in the past three years, including over 1.5mn in 2020.
Rosneft's energy saving programme helped achieve rubles 39bn ($530mn) in cost and 6.4mn mt in fuel savings over the past six years and is expected to save a further rubles 37.4bn and 2.6mn mt in 2021-2025. The company is also increasing production of Euro-6 standard motor fuels while phasing out older grades.
Analysts at VTB Capital welcomed the presentation of the company's plan, but cautioned that "the programme still remains quite high-level at this point, so some intermediate targets might be anticipated, given the increasing importance of ecology-related factors for oil and gas companies' investment cases."
BCS Global Markets added that Rosneft's discussion of the plan was "timely and detailed," noting it was good news for the company's share value, given investors' increased focus on environmental, social and governance ratings.
Gas business
The company aims to expand gas production to 25% of its overall output by 2023, versus 20% last year. The company lifted nearly 63bn m3 of gas in 2020.
The company is developing several new gas projects including fields owned by its subsidiary Rospan and the Kharampurskoye field, where it is partnered with BP. Rosneft recently said Kharampurskoye's launch would be delayed by a year until 2022. It is due to reach its plateau production capacity of 10bn m3 annually the following year.
Russia's finance ministry published a draft law in mid-February that would reduce the rate of mineral extraction tax at Kharampurskoye.