Novatek · RUS:NVTK
Novatek — ESG Presentation (October 2021)
55 slides from Novatek's sustainability presentation, October 2021
Slide 1: Fueling the Low-Carbon Energy Future
Fueling the Low-Carbon Energy Future Think Green. Think Natural Gas. Energy Affordability, Security & Sustainability ESG presentation October 2021
Slide 2: Contents
Contents 1. Sustainable developments highlights 2. ESG strategy 3. Environmental leader in O&G sector 4. Natural gas – cleanest fossil fuel 5. Corporate governance focus 6. Appendix Think Green. Think Natural Gas. 2
Slide 3: 1. Sustainable Developments Highlights
1. SUSTAINABLE DEVELOPMENTS HIGHLIGHTS 3
Slide 4: Our New Sustainability Metrics in 2020
Our New Sustainability Metrics in 2020 FIRST EVER DISCLOSURE Progress on achieving Scope 3 UN SDGs LTIFR, Scope 1 Environmental and Climate Change emissions Internal targets contractors injuries emissions by source Targets Innovations COVID-19 Cybersecurity # of Security Independent audit impact iss
Slide 5: NOVATEK ESG at a Glance 2020
NOVATEK ESG at a Glance 2020 LOWEST GHG EMISSION LEVELS OUR SOCIAL POLICY STRONG GOVERNANCE MODEL AMONG O&G PRODUCERS 9.1 mmt of CO2e 0.49 33% Scope 1 emissions LTIFR Share of Independent directors 0.24 tons of CO2e / RUB 4.1 bln 1st time ton of LNG Social investments woman was elected to NOVATEK’s
Slide 6: Sustainable Development Highlights (Y-o-Y)
Sustainable Development Highlights (Y-o-Y) NOVATEK is continuously improving COVID-19 NUMBER OF FATALITIES REDUCTION OF LTIFR anti-epidemic the quality and transparency of its measures RUB 4.8 bln 0 - 29% non-financial reporting with a view to enhance the confidence between the GHG intensity GHG INT
Slide 7: Sustainability Reports Since 2005
Sustainability Reports Since 2005 14 Sustainability Report th Downloadable at https://www.novatek.ru/en/development/ ONE OF THE LONGEST HISTORY OF SUSTAINABILITY REPORTING IN THE RUSSIAN O&G Think Green. Think Natural Gas. 7
Slide 8: 2. ESG Strategy
2. ESG STRATEGY NOVATEK 8
Slide 9: Sustainable Development – Integral Part of Strategy
Sustainable Development – Integral Part of Strategy* Sustainable reporting with GRI recommendations from 2005 * Corporate Strategy 2018-2030 Think Green. Think Natural Gas. 9
Slide 10: Sustainable and Low Carbon Focus Already in 2017 Strategy
Sustainable and Low Carbon Focus Already in 2017 Strategy Energy Security Supply the Global Markets with Energy Low Cost and Low Carbon Affordability Natural Gas Energy Sustainability Commitment to Reduce GHG Sustainable Development Emissions and Framework Mitigate Climate Change Risks Sustainabilit
Slide 11: Sustainable Development Strategy
Sustainable Development Strategy Our sustainability strategy is built around society’s urgent need for change towards low-carbon development Our contribution to a low-carbon future is in line with the Paris Agreement goals of limiting the increase in global average temperatures to 1.5 °C As part of
Slide 12: Integrating the United Nations SDGs
Integrating the United Nations SDGs NOVATEK'S PRIORITY SDGS AFFORDABLE AND CLEAN ENERGY CLIMATE ACTION DECENT WORK AND ECONOMIC GROWTH GOOD HEALTH AND WELL-BEING UNITED NATIONS SUSTAINABLE QUALITY EDUCATION DEVELOPMENT NOVATEK'S RELEVANT SDGS GOALS NO POVERTY RESPONSIBLE CONSUMPTION AND PRODUCTION C
Slide 13: Our Contribution to Relevant UN SDGs
Our Contribution to Relevant UN SDGs* • By 2030, increase our LNG production up to 70 MMTPA CLIMATE • By 2025, use energy-efficient LNG technologies to increase LNG and reduce GHG emissions • Established Environmental and Climate Change targets up to 2030 • Produce hydrogen, methane-hydrogen mixture
Slide 14: Our Priority UN SDGs
Our Priority UN SDGs AFFORDABLE, SAFE AND CLEAN ENERGY LONG-TERM SHAREHOLDER VALUE VALUE FOR SOCIETY • Secure supplier of clean fuel • Return on capital • Health and safety for personnel • Mitigation of negative • Responsible business and contractors environmental impact • Competitive advantages • C
Slide 15: Our Sustainability Timeline
Our Sustainability Timeline Established Sustainability Working Group Prioritizes 5 UN SDGs Sets targets for the specific GHG emissions 1 climate-related st disclosure Expands the mandate 1st Sustainability GHG Emissions consistent with of the Remuneration and Nomination Report with external 1st CDP
Slide 16: Our Position in ESG Ratings
Our Position in ESG Ratings NOVATEK's position in ESG ratings Other Analytical and Rating agencies Score Best score in Russian Oil & Gas sector 32.3 Rank # 20 out of 147 companies among O&G industry in 2021 Rating 3.7/5 NOVATEK is a constituent of the FTSE4Good Emerging Index Rating A NOVATEK - Firs
Slide 17: 3. Environmental Leader in O&G Sector
3. ENVIRONMENTAL LEADER IN O&G SECTOR 17
Slide 18: Environmental and Climate Change Targets
Environmental and Climate Change Targets 2019 2030 Reduce Methane Emissions per unit of -4% CH production in the production, processing 10.44 and LNG segments TONS / MMBOE -20% Reduce Air Pollutant Emissions per unit 0.128 of production TONS / MBOE Reduce GHG emissions per unit 12.58 -6% of producti
Slide 19: Scorecard of our Environmental and Climate Change Targets
Scorecard of our Environmental and Climate Change Targets 2019 2020 2030 Y-o-Y Methane emissions per unit of production 10.44 14.44 9.96 TONS / MMBOE TONS / MMBOE TONS / MMBOE Air pollutant emissions per unit of production 0.128 0.143 0.102 TONS / MMBOE TONS / MMBOE TONS / MMBOE GHG emissions per 12
Slide 20: Progress on Meeting Environmental and Climate Change Targets (1/2)
Progress on Meeting Environmental and Climate Change Targets (1/2) GHG emissions per unit of production in upstream The Group’s operations use cogeneration technology, almost 15 12.58 doubling fuel efficiency to achieve lower fuel gas consumption 11.75 10 8.65 and a significant reduction in GHG emis
Slide 21: Progress on Meeting Environmental and Climate Change Targets (2/2)
Progress on Meeting Environmental and Climate Change Targets (2/2) Air pollutant emissions per unit of production 0.20 By transitioning to direct pollutant measurements at the emission 0.149 0.143 0.15 0.128 sources, air pollutant emissions target for per unit of production was 0.10 achieved against
Slide 22: Our LNG Value Chain
Our LNG Value Chain 18.8 mmt of LNG* 15 LNG sales via 72 fields Arc-7 tankers Ship-to-Ship transshipment NGPA and license areas* 19.8 mmt of LNG** 11 LNG 29.3 bln Conventional KAMCHATKA boe reserves tankers transshipment CONSTRUCTION (PRMS)* (YAMAL LNG)* complex Sale to end CENTER customer via 23 fi
Slide 23: We can monitor, verify and deliver “Green LNG” cargos to the market
We can monitor, verify and deliver “Green LNG” cargos to the market Hierarchy of Carbon Emission Reduction approaches ELIMINATE Fossil Fuels Phase Out Replace Dirty Fuels with Lower Carbon SUBSTITUTE “Cleaner” Fuels Mitigation Solutions in Production, MINIMIZE Delivery and Use of Energy Carbon Captu
Slide 24: Commitment to Low Carbon Energy Mix
Commitment to Low Carbon Energy Mix Environment Share of 2020 natural gas production in O&G companies energy mix, % The target for NOVATEK’s share of natural gas >85% 100 90 80 70 60 50 40 30 20 10 0 INTERNATIONAL AND DOMESTIC PEERS Liquids Natural gas Source: 2020 Companies data International and d
Slide 25: One of the Lowest GHG Emissions in O&G Universe
One of the Lowest GHG Emissions in O&G Universe Oil and gas company GHG emissions intensity, kgCO2e/boe 450 400 Average O&G universe - 359 350 300 295 250 200 150 100 50 0 INTERNATIONAL AND DOMESTIC PEERS International and domestic peers: Suncor, Husky, Petrobras, Lukoil, Rosneft, Chevron, BP, Exxon
Slide 26: One of the Lowest GHG Emissions Level
One of the Lowest GHG Emissions Level O&G majors GHG emissions 100 250 GHG Scope 1 intensity, tons CO2/mboe (Ihs) Direct GHG emissions, mmt CO2e (rhs) 90 80 200 70 60 150 50 40 100 30 20 50 14,9 10 9,1 0 0 INTERNATIONAL AND DOMESTIC PEERS Source: Annual Reports, Sustainability Reports, 2020 Companie
Slide 27: Lowest Emissions Intensity by TPI
Lowest Emissions Intensity by TPI Emissions intensity in 2019 (gCO2e / MJ) – Scope 1, 2 and 3 61.9 64.6 INTERNATIONAL AND DOMESTIC PEERS 64.6 65.2 68.5 69.1 72.0 72.3 OIL AND GAS SECTOR MEAN 73.2 73.3 73.5 76.7 55 60 65 70 75 Source: Transition Pathway Initiative data as of October 2020 Internationa
Slide 28: Reporting on All Scope Emissions
Reporting on All Scope Emissions 9,055,750 tons 228,498 tons 173,250,940 tons of СО2 equivalent of СО2 equivalent of СО2 equivalent DIRECT EMISSIONS INDIRECT EMISSIONS INDIRECT EMISSIONS Company's operations Energy purchased Use and processing by the Company of products sold Scope 1 Scope 2 Scope 3
Slide 29: Yamal LNG Top Tier GHG Performance
Yamal LNG Top Tier GHG Performance GHG emissions intensity from major LNG plants in the world 0.70 t CO2 per ton of LNG 0.60 0.50 0.40 Average global LNG projects – 0.38 0.33 0.30 0.27 0.24 0.20 0.10 0 Yamal LNG ALNG-2 Yamal LNG projection* projection** actual (2014) (2020) (2020) *Estimations from
Slide 30: Our LNG projects have low GHG emission levels
Our LNG projects have low GHG emission levels Full-cycle GHG emissions intensity from major LNG plants in the world 800 700 600 Emissions Intensity (kgCO2e/ton) 500 400 710 300 625 623 508 449 444 200 353 341 318 100 0 Source: NOVATEK interpretation of WoodMac estimates Full cycle = Upstream + Pipel
Slide 31: Northern Sea Route Navigation
Northern Sea Route Navigation Unique Arc7 ice-class LNG carriers were specifically designed for the Yamal LNG project, capable of navigating the NSR without icebreaker support The Arc7 tankers are powered by low-carbon natural gas which emits significantly lower CO2 emissions, no sulphur (compliant
Slide 32: Reduction of Global CO2 emissions by replacing Coal
Reduction of Global CO2 emissions by replacing Coal 2020 2030 53 >170 LNG production 18.8 mmt LNG 62 mmt LNG Think Green. Think Natural Gas. 32
Slide 33: Industry Lowest Methane Emissions Level
Industry Lowest Methane Emissions Level 200 180 160 140 120 100 80 Average - 72 t / mmboe 60 40 20 14.44 9.96 0 2020 2030 INTERNATIONAL AND DOMESTIC PEERS Source: Annual Reports, Sustainability Reports, 2020 Companies data International and domestic peers: Chevron, ConocoPhillips. Petrobras, BP, RDS
Slide 34: New Permafrost Monitoring Disclosures
New Permafrost Monitoring Disclosures Engineering and design of each facility includes stability testing by the Company’s contractors for various climate warming scenarios Yamal LNG buildings and structures were designed with allowance for potential air temperature rise scenarios and the associated
Slide 35: Geotechnical and Environmental Monitoring
Geotechnical and Environmental Monitoring Proactive Construction Measures Control of permafrost condition • During construction process of Yamal LNG project more • To prevent potential negative effects of climate change, Cryological Monitoring than 38,000 piles were drilled primarily to eliminate an
Slide 36: Our Cooperation on Decarbonization
Our Cooperation on Decarbonization MOU on Decarbonization, Reduction of GHG emissions by implementing Hydrogen and CCS technologies and utilizing renewable Renewables energy sources Converting gas turbines to hydrogen-based Agreement on CO2 fuel gas mix Emissions Reduction Replacing fuel natural gas
Slide 37: 4. Natural Gas – Cleanest Fossil Fuel
4. NATURAL GAS – CLEANEST FOSSIL FUEL 37
Slide 38: LNG Growth in Every Net Carbon Zero Scenario
LNG Growth in Every Net Carbon Zero Scenario New LNG supply by 2060, mmtpa 800 +74% 700 +44% 600 500 +12% 400 300 430 ~750 ~620 ~480 200 MMTPA MMTPA MMTPA MMTPA 100 0 2020 Existing Supply Capacity 2060 Business as usual 2060 Net Zero 2060 Net Zero (OECD + China) (all) CHINA AND INDIA ARE THE KEY ARE
Slide 39: Natural gas demand in realistic vs unrealistic scenarios
Natural gas demand in realistic vs unrealistic scenarios Natural Gas Global Primary Energy Demand Scenarios, bcm % change % share in primary 2050 vs 2020 energy mix 6000 +32% 25% 5,100+ 5000 4,600+ +19% 24% 3,900+ +1% 22% 4000 3,500+ 3000 2000 1,700 -55% 11% No new natural gas fields are needed 1000
Slide 40: Natural Gas as an increasing share in region primary energy mix
Natural Gas as an increasing share in region primary energy mix % of coal in primary energy mix 80% 70% China 2020 60% China 2030 Potential combined 50% India 2020 LNG volumes of up 40% India 2030 to 350 MMTPA 30% 20% Europe 2020 US 2020 10% circle size – total region energy demand Europe 2030 US 20
Slide 41: 5. Corporate Governance Focus
5. CORPORATE GOVERNANCE FOCUS 41
Slide 42: Solid Corporate Governance Model
Solid Corporate Governance Model Representative composition of the BoD, a wide range Board independence, of expertise, significant experience in strategic, effectiveness and expertise operational, financial and ESG activities Sustainability function within the Remuneration Adopt best ESG practices o
Slide 43: Strong Focus on Corporate Governance
Strong Focus on Corporate Governance TIMELY AND IN-DEPTH FINANCIAL REPORTING CLEAR STRUCTURE OF FINANCIAL FLOWS DETAILED TRANSACTIONS HISTORY NO MAJOR LEGAL OR CORRUPTION RELATED CONTROVERSIES NO SIGNIFICANT OPERATIONAL ISSUES EFFECTIVE AND TRANSPARENT CORPORATE GOVERNANCE FRAMEWORK CREATES SUSTAINA
Slide 44: NOVATEK’s Corporate Governance Structure
NOVATEK’s Corporate Governance Structure Committed to sustainable development, the Company goes beyond mandatory compliance with Russian laws and internal regulations: it adheres to a variety of standards, codes, Russian and international best practices Board of Directors composition Supreme governa
Slide 45: Our Board of Directors Profile Matrix
Our Board of Directors Profile Matrix Alexander E. Andrei I. Robert Dominique Leonid V. Tatyana A. Gennady N. Name Arnaud Le Foll Natalenko Akimov Castaigne Marion Mikhelson Mitrova Timchenko Age (as of 31 December 2020) 74 67 74 42 59 65 46 68 Tenure (as of June 2021) 17 15 6 2 1 18 1 12 Independen
Slide 46: Efficient Multilevel System of Risk Management
Efficient Multilevel System of Risk Management We implemented a multilevel system of risk management and internal control to support managerial decision making STRATEGIC LEVEL report to Risk of Emergencies Board of Directors Audit Committee and Incidents TACTICAL LEVEL EFFICIENCY ASSESSMENT report t
Slide 47: High Corporate Governance Scores
High Corporate Governance Scores Ahead of peers in Governance themes score* 5 5 4.3 4.1 4 4 3.8 3.7 3.4 2.9 3 2.5 The highest scores in Governance and Anti-Corruption – top decile Anti-Corruption Corporate Risk Management ESG rating Gavernance NOVATEK Sub Sector Average: Integrated Oil&Gas Governanc
Slide 48: 6. Appendix
6. APPENDIX NOVATEK 48
Slide 49: Our Response to the COVID-19 Pandemic
Our Response to the COVID-19 Pandemic We are committed to the well-being of our valued employees above operational and financial results and implemented necessary measures to preserve our employees’ health and ensure safe working conditions We joined in the local efforts to address regional problems
Slide 50: NOVATEK Values Well-being Above Business Performance
NOVATEK Values Well-being Above Business Performance 2019 2020 MINIMIZE RISKS AND PREVENT THREATS OF ACCIDENTS AND INJURIES TO THE WORKFORCE LTIFR* 0.69 0.49 COMPLY WITH RUSSIAN OHS LAWS, AIM TO MEET RELEVANT INTERNATIONAL STANDARDS AND BEST PRACTICES Fatalities 0 0 CONTINUOUSLY IMPROVE AND ENHANCE
Slide 51: Employee Motivation and KPI System
Employee Motivation and KPI System • Our KPI system is simultaneously aimed at maximizing performance in delivering the Company’s strategy and motivating respective key employees. • A new corporate document on Regulations on Remuneration and Compensations Payable to Members of Board of Directors was
Slide 52: External Social Policy
External Social Policy We are fully committed to being a socially responsible corporation and supports local communi- ties and the regions in which it operates through projects and programs, as well as social welfare with a particular focus on helping individuals in need Social investments 4.1 bln R
Slide 53: Commitment to Lawful, Fair and Ethical Practices
Commitment to Lawful, Fair and Ethical Practices We make every effort to prevent corruption, take care to maintain impeccable reputation and seek to implement the most stringent international ethical standards Anti-corruption Policy • Strictly abides by the anti-corruption laws of Russia and other c
Slide 54: Respect Human Rights and Promote Equal Opportunities
Respect Human Rights and Promote Equal Opportunities We are in full compliance with the Labor Code of the Russian Federation and Russian laws in general, prohibiting any discrimination/limitation of labor rights and freedoms The Company shares the universal principles Security Hotline Grievance Mech
Slide 55: Disclaimer – forward looking statement
Disclaimer – forward looking statement Matters discussed in this presentation may constitute forward-looking statements. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which