Low-Carbon Development Programme

About the Programme

Today, the fight against climate change and the industry decarbonisation are firmly on the global political, investment and trade agenda. Carbon footprint reduction is the most important driver in the fight against global warming.

The sustainability and long-term decarbonisation is enshrined in the Paris Climate Agreement, which has a global target of maintaining the climate change at 1.5°C or below by 2100. And also the tightening of EU climate policy, which aims to reduce greenhouse gas emissions by 55% versus 1990 by 2030. In pursuance of this policy, the European Union plans to introduce carbon border regulation mechanism for imported carbon-intensive products.

For its part, Kazakhstan supports the global agenda to step up the efforts and ambition towards achieving the goals of the Paris Agreement, and has committed to a voluntary contribution to reduce greenhouse gas emissions by 15% by 2030 versus 1990.

Last November, the President of Kazakhstan Kassym-Jomart Tokayev spoke at a climate ambition summit where he declared Kazakhstan’s readiness to combat climate change and achieve carbon neutrality by 2060. A Carbon Neutrality Doctrine of the Republic of Kazakhstan by 2060 is being developed in pursuance of the goal stated by the Head of State.

On 13 October 2021, an International Conference on Ways to Achieve the Goals of the Paris Agreement and Carbon Neutrality of Kazakhstan with the participation of the Head of State Kassym-Jomart Tokayev was held in Nur-Sultan with the support of JSC NC “KazMunayGas”. The conference was also attended by high-ranking UN officials, international experts, representatives of the business community and civil society, financial institutions, development partners and the media. At the low-carbon exhibition, A. Aidarbayev, Chairman of the Management Board of JSC NC “KazMunayGas”, presented to Kassym-Jomart Tokayev the goals and ways of achieving carbon neutrality in our company.
https://akorda.kz/ru/prezident-vystupil-na-mezhdunarodnoy-konferencii-po-dostizheniyu-uglerodnoy-neytralnosti-1393134

In support of the state policy on low-carbon development of the country and in accordance with official instructions No. 47-r of Samruk-Kazyna JSC dated 24 May 2021 and No. 32-r dated 20 April 2021, JSC NC “KazMunayGas” developed 2022-2031 Low-Carbon Development Programme of JSC NC “KazMunayGas” (hereinafter, LCPD, the Programme), which was approved by the Board of Directors of the Company on 4 November 2021.

The Programme defines a unified low-carbon development framework of KMG and systematizes the Company’s carbon footprint reduction efforts.

The main goal is to determine KMG’s climate ambitions, systematise main approaches and measures to reduce the carbon footprint by analysing the existing potential, defining key development areas and enhancing the preparedness of the company.

Key Areas and Expectations

The Programme is structured with five key sections (carbon regulation analysis and key trends, KMG GHG emission inventory, scenario simulation, strategic areas of LCPD, implementation mechanism).

The introductory part of the Programme is focused on analysing the international, including primarily KMG’s main trading partners, and national climate regulations and their impact on the sustainability and continued competitiveness of the Company, which defined key prerequisites for KMG’s low-carbon development.

Detailed inventory of greenhouse gas emissions has been taken in order to analyse the current situation and establish a baseline for further development of the Programme.

Inventory was taken for direct (Scope 1) and indirect (Scope 2) emissions.

• Direct emissions are greenhouse gas emissions associated with combustion of hydrocarbon fuels and unavoidable volatile emissions from production processes at sources owned by KMG;
• indirect emissions associated with consumption of electricity, heat, hot water and steam supplied from third parties;

For the purposes of this programme, only CO₂ is considered in direct emissions.

The year 2019 is defined as a baseline year, as it is closest to the typical operations of KMG Group, unlike 2018 affected by the economic crisis and 2020 influenced by the coronavirus pandemic.

Scenario simulation of KMG development was based on the data collected as a result of inventory taking. The model considered three scenarios: baseline scenario, green development scenario and low-carbon development scenario.

The model predicts that KMG SDEs will show different GHG emission trends up to 2030 under the Business as Usual scenario. The total increase in GHG emissions across all assets will be about 4% versus 2019. However, model projections do not include planned future oil and gas chemical projects due to limited data for analysis.

The green scenario assumes the reduction of GHG emissions while maintaining the current operating structure of assets through energy efficiency efforts, electrification, and use of renewable energy.

The low-carbon development scenario includes projects for active deployment of hydrogen production, carbon capture and storage, and active offset policy (development of climate projects) in addition to the above efforts. However, given the country’s current state of readiness for new technologies, low carbon prices, some gaps in permitting and legislation framework, poor infrastructure, etc., this would require large investments but would not have a significant effect on reducing the carbon footprint by 2031.

Based on the above, the green development scenario with a focus on energy efficiency and renewable energy has been selected as the most promising scenario until 2031.

At the same time, promising areas should be piloted in order to build up competencies and in-house potential for subsequent scaling up, should favourable conditions arise. The Programme has these measures allocated into a separate block “additional decarbonisation measures”.

Based on this analysis and KMG’s country policy and development projections, the achievable goal for the Company under the Green Development Scenario is to reduce carbon dioxide emissions by 15% by 2031 versus 2019, or 1.6 mln tonnes of СО₂. The figure illustrates the main measures that would allow to achieve the stated goal.

KMG’s LOW-CARBON DEVELOPMENT PROGRAMME for 2022-2031

In addition, the Ministry of Energy of the Republic of Kazakhstan, Samruk-Kazyna JSC, JSC NC “KazMunayGas” and Total Eren S.A have signed a Memorandum of Understanding in 2021. The signed document is aimed at developing, financing, building and operating the hybrid power plants using wind energy in Kazakhstan, with a total capacity of about 1 GW. https://www.kmg.kz/rus/press-centr/press-relizy/?cid=0&rid=893

1. Reduce greenhouse gas emissions at KMG facility by capturing and reinjecting into depleted oil reservoirs or aquifers.
2. Test the technologies (analyse the results to develop the legislative and permitting framework of the Republic of Kazakhstan for implementation of carbon dioxide capture and storage (CCUS) projects and their further scaling).

This includes the screening of CO2 emission sources in SDEs to identify potential sources, study and evaluate prospects for CO₂ injection to enhance the oil recovery in depleted oil reservoirs, research and development followed by design, construction and commissioning of a pilot facility (taking into account the specifics of the selected location). The preliminary stage of screening at KMG’s assets is scheduled to be completed as early as 2023, allowing the first stage of the Project (Research and Design) to be implemented in 2024-2025.

To build up competence in this business area, in September 2021, JSC NC “KazMunayGas” and Shell Kazakhstan B.V. signed a Memorandum of Cooperation in development of carbon capture, utilisation and storage (CCUS) technology. The Memorandum stipulates a joint study of the potential for implementing a pilot project of using CCUS technology to identify and develop basic criteria for carbon capture and utilisation. The document aims to strengthen a long-term mutually beneficial partnership between the parties, as well as to support Kazakhstan’s efforts to fulfil its commitment to reduce greenhouse gas emissions under the Paris Agreement. Pursuant to the signed document, Shell’s technical experts intend to share the international experience in implementing similar CCUS projects.

https://www.kmg.kz/rus/press-centr/press-relizy/?cid=0&rid=890

A Memorandum of Understanding was also signed on 29.10.2021 between JSC NC “KazMunayGas” and Linde Technology Company to implement promising hydrogen energy projects. The parties agreed to cooperate and jointly develop clean energy projects in Kazakhstan. The first stage of cooperation will explore the possibility of producing hydrogen and ammonia using natural gas as feedstock (‘blue’ hydrogen and ‘blue’ ammonia) and/or electrolysis water (‘green’ or ‘blue’ hydrogen and ‘green’ or ‘blue’ ammonia). Following a feasibility study and successful agreements, it is planned to implement a green hydrogen and green ammonia production project in Kazakhstan.  https://www.kmg.kz/rus/press-centr/press-relizy/?cid=0&rid=897

Climate Change. Greenhouse Gas Emissions

We make it our highest priority to minimise our impact on environment through compliance with environmental law, rational use of natural resources and continuous improvement of our environmental activities. Our priorities include careful and rational use of natural resources, minimisation of environmental risks. Target Programmes are intended to reduce raw gas flaring, develop green energy based on renewable energy resources and increase general energy efficiency.

KMG at the level of the corporate centre manages subsidiaries and dependent entities with regard to greenhouse gas and pollutant atmospheric emissions, monitors timely obtaining of all permits for operations, such as emissions permit, greenhouse gas quota, raw gas flaring permit.

Atmospheric air impact minimisation programmes include raw gas development and processing programmes for production sector, oil refineries upgrade programme, application of the latest available technologies in construction of new transportation facilities, etc. Gradual implementation of these programmes will result in reduced pollutant and greenhouse gas emissions into the air, increased beneficial use of raw gas.

KMG Group has an Emissions Management Policy, which defines the main principles of atmosphere impact minimisation management:

1. Operating in strict compliance with the law and other Company commitments;
2. Observing the established pollutant emission standards and emission limits, greenhouse gas quotas;
3. Clear allocation of functions and duties, increased competence, training and awareness;
4. Regular accounting, inventory checks and monitoring of emissions;
5. Stopping regular flaring of raw gas during raw hydrocarbon production;
6. Activities to reduce greenhouse gas emissions and carbon footprint;
7. Management of carbon assets;
8. Continuous improvement of emissions management activities.

We adhere to the national legislation, best international standards, provisions of the Company’s internal documents in the field of health and safety, environmental protection and other internal corporate documents, identify and assess environmental risks, ensure transparency and openness of our actions in the field of environmental protection.

We continue working on improvement of our production facilities’ operations to reduce atmospheric air impact. We take active part in improvement of regulatory framework of the country, hold meetings of Emissions Management Working Group, participate in climate change forums, conferences, enhance our knowledge and skills to improve our abilities in implementing the emissions reduction strategy.

KMG Long-Term Development Strategy defines the following climatic priorities:

1. Managing the atmospheric greenhouse gas emissions;
2. Reducing routine flaring of associated petroleum gas;
3. Improving the emissions intensity rates per volume of production and increasing the energy efficiency;
4. Reducing methane leakage;
5. Increasing the funding of green projects.

The global trend to fight climate change is increasingly affecting companies around the world. KMG has approved a 2022-2031 Development Strategy that meets high safety standards and sustainable development principles. According to KMG’s Development Strategy, low-carbon development to reduce the carbon footprint is one of the Company’s main development areas.

In support of the government’s decarbonisation initiative, KMG has developed and approved its 2022-2031 Low-Carbon Development Programme, which aims to reduce its carbon footprint by 15% versus 2019. Climate change issues are monitored at the strategic level by the Board of Directors, Health, Safety, Environment and Sustainability Committee of KMG’s Board of Directors.

We aim to increase oil and natural gas production to meet the world’s growing demand for energy, which is why we focus on activities to minimise adverse impact our operations have on the environment through compliance with the environmental law, rational use of natural resources and continuous improvement of environmental activities.

We plan to set long-term targets for air emission reduction considering the changes in the external environment and requests from stakeholders.

Greenhouse Gas Emissions

In 2021, the Carbon Disclosure Project published the Climate Questionnaire for 2020, which includes data on the amount of direct and indirect greenhouse gas emissions for all KMG assets, including subsidiaries in Romania and Georgia.

The calculation includes carbon dioxide (CO₂ ), methane (CH₄), nitrous oxide (N₂O). Data on direct greenhouse gas emissions are confirmed by conclusions of independent accredited organizations for each subsidiary. Information for 2021 will be disclosed in the CDP report in Q3 2022. We adhere to the principle of consistency and comparability in our disclosures. We are continually working to improve the completeness of our disclosures and expand the reporting areas for Scope 3 indirect emissions.

Direct greenhouse gas (CO₂ ) emissions for 2021 for the KMG Group were 6.9 million tonnes of CO₂ (11.4 million tonnes of CO₂ Eq.), slightly higher than the 2020 level.

The CO₂ emission rate was 102 tonnes per 1,000 tonnes of hydrocarbons produced, which is 10 percent below the industry average of 113 from the International Association of Oil and Gas Producers (IOGP).

The increase in the intensity of greenhouse gas emissions is associated with a change in approaches to calculating greenhouse gas emissions.

In its activities, the Company does not emit ozonedepleting substances that affect climate change. Periodic control and monitoring are carried out. Climate change issues require identifying risks and taking measures to reduce the burden on the environment.

The corporate risk management system is a key component of the corporate governance system and is aimed at timely identification, assessment, monitoring and mitigation of potential risk events that could adversely affect the achievement of strategic and operational objectives. The Company takes into account the risks associated with climate change and strives to contribute to a sustainable future with the maximum possible reduction of environmental impact and greenhouse gas emissions at all stages of its operations. The corporate risk register has been expanded with a new climate change risk. We report quarterly to the Board of Directors on HSE risks.

Energy Efficiency Improvement and Energy Saving

Use of Energy Resources and Improvement of Energy Efficiency

KMG continues its energy saving and energy efficiency improvement programme across KMG Group. KMG’s Corporate Centre collects and analyses energy consumption and energy efficiency data, monitors the progress and identifies areas for improvement, performs a benchmarking against the previous period and the performance of peers (IOGP).

The Company’s activities in the field of energy saving and energy efficiency are based on the methods of ISO 50001 Energy Management Systems, which are the best generally recognised international practices for system management in this area.

Reduction of Energy Consumption

The main strategic areas of energy saving and energy efficiency development in KMG Group are upgrading of process equipment, introducing energy saving technologies, optimising heating energy generation and consumption as well as developing own generation sources, including those using APG.

49 energy saving and energy efficiency measures were implemented in 2021, the planned annual saving of fuel and energy resources amounted to 0.34 mln GJ, in physical terms – 5.3 mln kWh of electricity and 8,107 thous. m³  of natural gas.

Energy Intensity

In 2021, KMG Group’s average specific energy consumption for hydrocarbons production was 2.4 GJ per tonne of produced HCs, which is still 58% higher than the figure of the International Association of Oil & Gas Producers (IOGP), which in 2020 was 1.4 GJ per tonne of produced hydrocarbons. The increase in specific energy consumption in oil production is primarily due to the increasing water cut in mature fields, as the specific density of produced liquid increases just as the energy required for mechanical methods of production.