A task-level environmental protection program was developed in 2011 as part of the 2012—2021 LUKOIL Group Development Strategy. The following strategic guidelines for environmental safety promotion were identified:
attain a 95% level of utilization of associated petroleum gas (APG)
discontinue discharges of contaminated waste waters into water bodies
reduce emissions of greenhouse gases and raise income through implementation of the mechanisms specified in Art. 6. of the Kyoto Protocol
complete elimination of “previous environmental damages”
do not exceed the ratio of 1 for generated waste to utilized waste
do not exceed the 15-percent limit for emissions above the allowable level in the payment structure for negative environmental impact
lower the number of pipeline failures and reclaim lands contaminated due to these failures.
In its business, ОАО LUKOIL is guided by the highest HSE standards. Taking social responsibility for the efficient use of natural resources in all its earnestness and maintaining safe environmental conditions is regarded as one of the key factors to be considered over the course of project implementation.
In 2011, ОАО LUKOIL and other organizations of the Group took regular measures to ensure industrial and environmental safety, emergency prevention and emergency response.
In July of 2011, the Company’s Management Committee approved the 2011-2013 edition of the LUKOIL Group Environmental Safety Program for 2009–2013 developed on the basis of the updated version of the environmental aspects register, LUKOIL Group’s proposals, as well as in view of the needs of the Power Engineering Business Sector, which has been separated in the corporate structure. The financing required for the Program implementation in 2011–2013 comes to around USD 2 billion.
Over USD 700 million was allocated for environmental safety measures in the reporting year. A considerable share of these funds was allocated for measures aimed at ensuring compliance with the state requirements to reach a 95% level of utilization of associated gas starting in 2012.
In 2011, the implementation of environmental measures helped reduce the majority of the environmental impact factors (including specific ones), with the exception of the atmospheric pollutant emissions. The growth of the emissions weight is accounted for by the considerable increase in the minor generation of electric power by the Company’s facilities and respective increase in the fuel consumption rate, as well as by the increased combustion volume of associated petroleum gas in a number of LUKOIL Group organizations. We pay special attention to the utilization level increase in order to ensure compliance with the RF Government requirement, i.e., attainment of at least a 95-percent utilization level of associated petroleum gas and minimization of the above-norm environmental payments starting in 2012. All organizations of the Group are expected to be fully compliant with these requirements by 2015.
According to the results of 2011, a 2-fold reduction in the discharge of contaminated-waste water was registered, all due to the measures taken to enhance the efficiency of the treatment facilities. A 6% reduction in water consumption is mainly due to the implementation of administrative and technical measures to ensure efficient water consumption in the organizations of the Power Engineering business sector (the Group’s largest water consumer).
The environmental and economic mechanisms of the Kyoto Protocol served as an important driving force to invest in measures aimed at reducing the atmospheric emissions of greenhouse gases. In general, as of the beginning of 2012, the portfolio of the Russian projects aimed to reduce emissions of greenhouse gases (GG) in LUKOIL Group comprises 14 projects with a total volume of 33 million tons of GG emissions, in CO2 equivalent, to be reduced in 2008—2012. Eight hydrocarbon projects of LUKOIL Group were approved by the RF Ministry of Economic Development and Trade as joint-implementation projects under Art. 6 of the Kyoto Protocol. The first revenue tranches from the sales of ERU with a total volume of 1.3 million Euro have already been received for three of the projects (with OAO RITEK as the operator). The revenue from ERU sales under other projects approved at the national level is expected in July and August of 2012. For six of the projects, packages of documents, required for applications to be submitted to the Sberbank of Russia for approval, have been prepared.
LUKOIL Group organizations ensured environmental safety in 2011 through a number of measures aimed at the efficient use of water resources, prevention of contamination of water bodies, reduction of pollutants in the atmospheric emissions, utilization of accumulated oil waste, contamination prevention and efficient use of land resources. Some of the measures taken were:
trouble-shooting and capital repair of pipeline transport
modernization and construction of facilities enhancing the petroleum gas utilization level
purchase of equipment for possible emergency oil and petroleum product spill response
reclamation of impaired and oil contaminated lands
integrated monitoring of environmental components
construction of new and reconstruction of existing water supply and water drainage networks
assembly of chlorination units for the disinfection of industrial and river water
replacement of equipment and optimization of technologies aimed at lower pollutant emissions
construction of a complex for oil-contaminated waste treatment.
A compliance audit of the LUKOIL Group HSE Management System was conducted in the reporting year. The auditors of Bureau Veritas, an international certification company, visited 21 organizations of the Group. Following up on the results of the compliance audit of the LUKOIL Group organizations, two cases of material inconsistency in ZAO LUKOIL-AIK (eliminated in the course of the audit), and 17 cases of minor inconsistency were registered, which, however, require the development of corrective and preventive measures.
LUKOIL pursues active development of the Refining&Sales Business Segment, focusing its efforts on an increase in its oil conversion rate and the output of engine fuel with improved environmental characteristics. The 2012—2021 Strategy provides for:
Considerable improvement of light petroleum products output at Russian refineries
70% rise in gasoline manufactured at Russian refineries
Commissioning of new secondary oil-refining units at Russian refineries
Bringing overseas refineries in line with the highest world standards.
The share of high-octane gasoline in the total gasoline output of the Group’s Russian refineries (excluding mini-refineries) rose to 96.2 % in 2011 (91.5% in 2010). The output of light petroleum products reached 52.0% (48.5% in 2010).
All the refineries followed scheduled implementation of the technical upgrade and production automation programs, as well as programs to raise energy efficiency and enhance industrial and environmental safety. The CAPEX of the Company’s refineries located in Russia reached USD 524 million in the reporting year (USD 558 million in 2010).
In 2011, LUKOIL Group manufactured the first batch of Euro-5 compliant automobile gasoline, which became possible due to the commissioning of a hydrogen fluoride alkylation unit as part of the Catalytic Cracking Complex at OOO LUKOIL-Nizhegorodnefteorgsintez. The Euro-5 compliant gasoline guarantees the so-called “clean exhaust”; in other words, it minimizes the content of sulfur oxide and of the incomplete-combustion products of aromatic hydrocarbons, including benzopyrene, the most carcinogenic and mutagenic substance, in the exhaust gases.
One of the projects to be implemented at OOO Stavrolen in the coming years is the construction of a gas-processing complex for the North Caspian gas. This complex will utilize the raw hydrocarbon resources extracted by LUKOIL Group in the Caspian Region. The Complex-related project is aimed at increasing added value due to the advanced processing of the gas feed, i.e. ethane and the wide fraction of light hydrocarbons.
The design and survey work was completed in 2011, as well as preparatory work to establish the Complex. The construction terms and stages for the complex facilities were updated under the North Caspian field development schedule, design documentation “Gas Processing Unit, the First Start-up Complex with the Capacity of 2 billion cubic meters of Feed/Year” was developed and a favorable opinion by the state expert review committee was obtained.
The Company is continuously enhancing its electric power supply safety and working to reduce energy consumption. The corporate programs of saving energy and enhancing the safety of the power supply are considered key priorities in these lines of business.
An Energy Saving Program for LUKOIL Group Organizations was approved at the beginning of the reporting year. The Program is based on the proposals by the enterprises to stabilize and reduce the energy intensity in the hydrocarbon raw extraction and processing, petroleum product supply, petrochemical, power engineering and transportation sectors. In 2011, power savings due to the introduction of energy-saving technologies, as part of the Program, reached USD 35 million.
In 2011, LUKOIL Group developed an engineering policy in the area of energy efficiency that focuses on the creation of a uniform Engineering Policy in the Company. It outlined the most advanced engineering solutions and engineering performance standards that must be applied to the new projects implemented by the Company. To ensure energy efficiency within the investment projects and the application of cutting-edge energy efficient solutions, an expert review of all scheduled projects and investment programs was conducted.
Efficient utilization of electric power enables the Group to materially reduce its energy costs. An automated information and measuring system of electric power commercial accounting has been introduced and is in place at all of the Company’s subsidiaries. This system enables the Company to reduce the electric power purchase costs due to settlements on the basis of differentiated rates depending on the day zones, as well as due to better accounting accuracy and the opportunity to purchase electric power and capacities in the wholesale market.
The introduction of an energy management and certification system compliant with ISO 50001 Standard, “Energy Management Systems. Requirements and Guidelines for their Application in LUKOIL Group”, was discussed in 2011. Risk, introduction expediency and costs were assessed, a preliminary schedule and a road map for the system introduction were created, and pilot projects for its implementation were developed.
Renewable Power Generation
The Company recognizes the huge resource- and energy-saving potential of alternative energy sources. The priority types of alternative renewable energy sources encompass hydraulic power, wind power, solar power and geothermal power engineering. Today, the alternative energy forms are developed through cooperation with the international companies focusing on renewable power generation. In 2011, LUKOIL Group promoted cooperation in the area of renewable power generation with Italy’s ERG Renew that has vast experience in the construction and operation of renewable power generation facilities. The LUKOIL-ERG Renew partnership focuses on wind power projects in Bulgaria, Romania, Ukraine and Russia. Primarily, these are the projects of “network” power stations in the countries of the Company’s active presence where the state provides administrative and economic support of the renewable power industry, including the projects of the “network” wind power stations in Bulgaria and Romania.
LUKOIL is participating in the construction of a 100 MW solar power station in Uzbekistan jointly with the Uzbek Government and the Asian Development Bank.
The end of 2011 saw the commissioning of a 1.25 MW photovoltaic power plant (PPP) at the LUKOIL Group TPP in Bulgaria. The expected yearly electric power generation volume is around 1,500 MW/h. The PPP operation will considerably reduce the negative environmental impact.
The Company’s achievements in the area of environmental safety were highly praised; LUKOIL was the winner of the 2011 contest “National Ecological Award” in the category “Innovative Eco-efficient Technologies in Industry”. In addition, LUKOIL won the Second All-Russian Contest for Healthy Lifestyle Projects, “Healthy Russia”, in “The Best Corporate Project” category held under the auspices of the RF Ministry of Healthcare and Social Development as part of the state program for healthy lifestyle promotion.