Page 6 - FSUOGM Week 09 2021

FSUOGM COMMENTARY FSUOGM

Rosneft details 2035

carbon goals

The strategy's unveiling comes after Rosneft

formed a carbon management with its largest

foreign shareholder BP last month

RUSSIA RUSSIA'S largest oil producer Rosneft has pre-
sented its 2035 Carbon Management Plan to
WHAT: investors and analysts, targeting a 30% reduction
Rosneft has presented in upstream emissions.
a 15-year carbon The state-owned company is also aiming to
management plan. prevent 20mn tonnes of CO2 equivalent (e) in
future greenhouse gas (GHG) emissions, while
WHY: lowering its existing emissions, which totalled
ESG ratings are quickly 81mn tonnes of CO2e in 2019. It wants to cut
becoming a required flaring of associated petroleum gas (APG) to
focus for international zero and develop natural CO2 sinks.
investment managers. The unveiling of the strategy comes after
Rosneft last month signed a collaboration agree-
WHAT NEXT: ment with one of its shareholders BP on working
The plan remains high- together to address their environmental impact.
level, and so some more Both companies are under pressure from cli-
intermediate targets are mate-conscious investors and buyers. Markets commented on March 2, seeing the
expected. Rosneft expects to make these gains largely news as positive and reiterating a Buy call on
through its energy efficiency programme, as Rosneft shares.
well as by utilising more of its gas, reinjecting "With ESG issues quickly becoming a
APG, purchasing renewable energy, develop- required focus for international investment
ing wind power and establishing blue hydrogen managers, we consider this a positive event for
production. the stock," BCS GM analysts wrote.
The discussion of potential wind power pro- Sova Capital noted that Rosneft has already
jects at Rosneft's major Arctic project Vostok Oil started work on becoming greener, with it hav-
is ongoing. "Vostok Oil in general might be quite ing spent RUB120bn on green investments over
favourable for Rosneft's carbon footprint, as the the last three years, and affirmed a Buy call on
company is developing it using best practices," Rosneft's shares.
VTB Capital (VTBC) commented on March 2. Sova analysts expect more details on the
Rosneft also mentioned the potential bene- company's ESG strategy to be announced in the
ficial effect of Russian forests (which can poten- future, along with the interim goals for GHG
tially act as a carbon sink for 1.1-5.9bn tonnes of reduction and further details on the develop-
CO2) as well as its own reforestation programme ment of Vostok Oil.
(10-20mn tonnes per year (tpy) in potential Rosneft is ranked number 16 in the latest RA
offset). Expert Russian corporate ESG ranking, a new
The energy-saving programme had already list that analyses the ESG scores of the major
helped achieve 6.4mn tonnes of energy and Russian corporations. It ranks best on the envi-
RUB39bn ($529mn) of cost savings in 2014-20, ronment (7) and worst on corporate governance
Rosneft said. (27).
While VTBC analysts welcome more details In this environment a comprehensive ESG
on the 2035 Carbon programme, they note it agenda is a logical next step for Rosneft, which
"remains quite high-level at this point, so some has been working hard on improving its invest-
intermediate targets might be anticipated, given ment appeal. In 2018 the company pushed a
the increasing importance of ecology-related broad investment makeover, when it pledged
factors for oil and gas companies’ investment to cut debt, rein in its investment programme
cases." and shed non-profitable assets. The company
"Rosneft’s call on its carbon management also raised its dividend payout to 50% of IFRS
plans was timely and detailed," BCS Global profit. ™

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