Climate Strategy

Scenario analysis

In 2020, new targets for reducing GHG emissions were calculated in accordance with the Recommendations of the Intergovernmental Panel on Climate Change (IPCC) and with the Paris Agreement goals based on scenarios of keeping global temperature increases between 1.5 0C and 2 0C. In addition to the “Evolution” Source: “Major Trends in the Global Liquid Hydrocarbon Market to 2035” scenario previously discussed, we have developed the “Equilibrium”, “Transformation”, and “Two Degrees Celsius” scenarios. All these scenarios assume a significant increase in the share of renewable energy sources, recycled plastic and accelerated electrification of vehicles.

Each of these scenarios presents complex challenges for the global community, which cannot be overcome quickly. In addition, it is very important that progress towards energy transformation does not conflict with the achievement of other SDGs. To ensure that all sustainability goals are taken into account, alternative energy must be affordable and sufficient to not only gradually replace fossil fuels, but also to provide additional power to a growing global economy. For these reasons, none of the scenarios we have developed involves a complete rejection of fossil fuels. Oil will retain a significant role in the global energy balance and as a raw material for the production of consumer goods for a long time to come. Oil and gas companies, suppliers of energy resources, are to ensure energy supplies for the global economy, adjusting their operations to SDGs and global efforts in reducing GHG emissions.

Climate Strategy

Given LUKOIL’s competitive edge and our commitment to reduce emissions, we will continue to supply the world economy with the most efficient fossil fuels while focusing on reducing the carbon footprint associated with production. To support this mission, we have identified three tasks for LUKOIL’s climate strategy and the goals and means associated with each.

Mission: Responsible hydrocarbon producer

Task 1
Task 2
Task 3

Continue development of core business.
Reduce controlled GHG emissions (Scope 1 + Scope 2).
Participate in climate initiatives and develop climate opportunities.

Focus on efficiency of using conservative oil pricing and domestic carbon price scenarios in investment decisions.
Improve energy efficiency
Enhance RES energy consumption
Develop carbon capture and storage projects
Optimize the asset portfolio.
Implement GHG emission reduction technologies
Develop the regulatory environment in Russia
Expand commercial generation from renewable energy sources
Study low-carbon energy resources (biofuel and hydrogen)
Implement reforestation projects.

We have set a new goal for the reduction of GHG emissions by 2030. We plan to reduce controlled emissions (Scope 1 + Scope 2) per unit of energy equivalent by 20 percent compared to 2017. We have chosen this year as a baseline in accordance with the approach of the Intergovernmental Panel on Climate Change. This target is the equivalent of reducing gross GHG emissions by 10 million tonnes, given comparable conditions.

Based on an assessment of technologically achievable and potentially effective measures, we have identified about 60 measures to help reduce emissions. The economic efficiency of these projects can be increased with government support. The introduction of national regulation and support for decarbonization measures and adaptation projects which take into account the specifics of the Russian oil industry will significantly expand the Company’s capabilities to reduce GHG emissions in Russia.

Interaction on climate policy

We constantly monitor climate regulation and actively participate in discussions of the climate agenda and policy-making initiatives in the Russian Federation and abroad. In Russia, we are in direct dialogue with the Government Executive Office of the Russian Federation, the Ministry of Energy, the Ministry of Economic Development, the Ministry of Natural Resources and Environment, and other institutions. LUKOIL representatives take part in the work of industry associations, for example, in the work of the Committee on Climate Policy and Carbon Regulation created by the Russian Union of Industrialists and Entrepreneurs Leonid Fedun, Vice-President of PJSC LUKOIL, was appointed the Deputy Chairman of the Committee. . The Committee is a platform for discussing the policy-making initiatives of the Government of the Russian Federation and determining the position of business regarding various options for regulating GHG emissions in the context of the national goals set by the Russian Federation. LUKOIL presents its position In particular, LUKOIL presented its position on Russian draft laws and regulations on Limiting Greenhouse Gas Emissions, on Amendments to the Guidance for Quantification of Indirect Energy Emissions of Greenhouse Gases Approved by Order of the Ministry of Natural Resources of Russia dated June 29, 2017 No. 330, on the Approval of Guidance and Target Indicators on Adaptation to Climate Change, on Amendments to the Federal Law on the Electric Power Industry. and experience in implementing greenhouse gas emissions reduction projects.

The legislative program of PJSC LUKOIL in Russia for 2021 contains initiatives — in particular amendments to the Forestry Code of the Russian Federation – which would allow including reforestation as a measure to reduce GHG emissions, as well as participation in the discussion of draft laws related to the regulation of GHG emissions and the introduction of a low-carbon certification system, as well as national support for emissions reduction.

PJSC LUKOIL also actively participates in the discussion of key legislative initiatives in the European Union, including such topics as the EU ETS emissions trading system, emission standards in the transport sector, and renewable energy. Much attention is paid to discussions on the impact of introducing the EU carbon border adjustment mechanism, which is expected to be implemented in 2023.

Power station

of Sustainable Development. Climate-related projects

LUKOIL was one of the first Russian companies to start implementing projects to reduce APG flaring and to utilize this energy resource in gas turbine power plants to generate electricity. In 2012, a corporate program for the sustainable use of APG was launched, to which more than half of the Company’s environmental budget was allocated annually. Even earlier, in 2007, the first projects were developed based on the provisions of the Kyoto Protocol. At that time, a corporate system for managing and accounting for GHG emissions was established. The implementation of these Kyoto projects produced major results: 32.8 million emission reduction units. During the intervening year, LUKOIL has continued implementing projects to reduce GHG emissions, and by 2021 formalized them in its climate strategy.

1990s
2020
1990s

APG utilization at the fields of Western Siberia (where the Company was founded) in the mid-1990s was about 70 percent .

2020

APG utilization in LLC LUKOIL-West Siberia amounted to 98.3 percent.

1990s

Carbon dioxide was not considered a pollutant in Russia, and data on CO2 emissions was not subject to statistical reporting.

2020

A carbon management system has been created and is constantly being improved taking into account modern requirements: a comprehensive climate strategy is being developed.