NOVATEK's Sustainability Report 2019
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Sustainability Report 2019 Sustainability Report 2019 2 | 3 Contents LETTER FROM THE CHAIRMAN OF NOVATEK’S EXTERNAL SOCIAL POLICY MANAGEMENT BOARD . 4 Cooperation with Russian Regions . 103 LETTER FROM THE DEPUTY CHAIRMAN Educational Programs . 106 OF NOVATEK’S MANAGEMENT BOARD . 8 Preserving Cultural Heritage . 108 Promotion of Sports . 109 REPORT AND REPORTING PROCESS Help to Children in Desperate Need . 109 Report Preparation . 12 Corporate Volunteering . 110 Defining Report Content and Material Topics . 14 Aid to Veterans . 111 Materiality Matrix . 16 EMPLOYMENT PRACTICES COMPANY PROFILE Employee Profile . 114 NOVATEK’s Core Assets as at 31 December 2019 . 21 Employee Motivation and KPI System . 116 Share Capital Structure and Market Capitalization . 22 Personnel Training and Development . 117 Membership and Participation in Trade Associations . 23 Social Policy . 121 Awards and Achievements . 24 Trade Union Relations . 125 Interaction Between Management and Employees SUSTAINABLE DEVELOPMENT STRATEGY Discussing Current Issues . 125 Our Approach to Sustainability . 29 Integrating the United Nations Sustainable PROCUREMENT PRACTICES Development Goals . 30 Procurement Approach . 128 Materials and Equipment Supply Chain CLIMATE CHANGE Management . 129 Climate Change Management . 38 Procurement Performance . 131 Risks and Opportunities . 38 Import Substitution Policy . 131 Climate Protection Initiatives . 42 OCCUPATIONAL HEALTH AND SAFETY STAKEHOLDER ENGAGEMENT Our Approach to Occupational Health and Safety . 134 Stakeholder Engagement Principles . 46 Operational Control . 137 Stakeholder Engagement Matrix . 48 Accidents and Incidents . 138 Workplace Injury Rate . 140 CORPORATE GOVERNANCE OHS Training . 141 Corporate Governance System . 58 Fire Safety, Civil Defense and Emergencies . 142 Remuneration to the Members of the Board of Directors and Management Board . 64 ENVIRONMENTAL PERFORMANCE AND PROTECTION Internal Control and Audit . 65 Environmental Vision . 146 Risk Management .. 67 Environmental Monitoring . 146 Environmental Protection – Government Control . 147 ETHICS Environmental protection: achievements . 148 Anti-Corruption Policy . 72 Emissions and Waste . 150 Prevention of Conflicts of Interest . 72 Water Use and Discharge . 153 Human Rights . 73 Energy Consumption and Efficiency . 154 Biodiversity Conservation . 155 OPERATING RESULTS Disturbed Area Reclamation . 158 Ensuring Strong Economic Performance . 78 Environmental Protection Training . 158 Business Model . 79 Environmental Costs . 159 Production . 82 Hydrocarbon Reserves . 84 NOVATEK’S RESPONSE TO THE COVID-19 PANDEMIC . 161 Hydrocarbon Production . 86 Processing of Gas Condensate . 89 APPENDIX 1 . Report Boundaries . 162 Marketing and Sales . .. 91 APPENDIX 2 . Personnel Structure . 164 Dividends . 93 APPENDIX 3 . Compliance with GRI Standards . 169 Processing of Gas Condensate . 94 APPENDIX 4 . Independent Auditor’s Assurance . 182 Natural Gas Sales . 95 Social Media and Contact Details . 184 LNG Sales . 96 Glossary . 185 Liquid Hydrocarbons Sales . 98 Units . 186 NOVATEK Sustainability Report 2019 4 | 5 102-14 Letter from the Chairman of NOVATEK’s Management Board We are delighted to release NOVATEK’s Thirteenth Sustainability Report 2019 where we present our Company’s economic, environmental and social performance, as well as our contribution to the UN Sustainable Development Goals. Leonid MIKHELSON Dear stakeholders, of all three liquefaction trains, whereby Yamal LNG oper- get access to clean-burning, affordable energy resources than 2 degrees Celsius, we have defined our corporate ated above the combined facility’s nameplate capacity of in a sustainable way . strategy that provides for maximum operational resilience We are delighted to release NOVATEK’s Thirteenth 16 5. million tons per annum . As a result, the plant shipped in progressive decarbonization scenarios . Our corporate Sustainability Report 2019 where we present our 18 4. mmt of LNG, representing 5% of the global LNG Although global markets are going through many challenges goals are consistent with Paris Climate Agreement ratified Company’s economic, environmental and social perfor- production, as well as 1 .2 mmt of gas condensate . caused by the COVID-19 pandemic we believe a period of by the Russian Federation in 2019 . mance, as well as our contribution to the UN Sustainable relatively lower gas prices will spur opportunities for addi- Development Goals . As climate change impacts the entire We progressed towards our goal of becoming one of the tional demand growth as this pandemic will eventually pass . Sustainable development is a key element of our corporate global community, its role in our operations also has an world’s largest LNG producers and in 2019, we successfully Key importing countries will transition from using coal to strategy through 2030 . It is embedded in our operational important place in this Report . launched commercial production at Cryogas-Vysotsk, the natural gas as part of the Energy Transition . Natural gas decisions and testifies to our commitment to sustain- Company’s first medium-scale LNG project, in the port of will play a vital role towards an environmentally sustainable ability and a greener environment . Our corporate position NOVATEK celebrated its 25th anniversary in 2019 . Over the Vysotsk in the Leningrad Region . We see strong prospects future with LNG as a key driver in future global gas demand is consistent with the Sustainable Development Goals set quarter of a century, our Company has transformed from in using LNG as marine and motor fuels to substitute for growth . Our focus is to become a leader during this energy by the UN General Assembly in 2015 by implementing our a Russian domestic natural gas supplier into a global fuel oil and diesel as a contribution to curbing transport transition by implementing our future LNG projects . ecological and social programs . This year, we have chosen LNG market player with natural gas delivered to 28 coun- emissions and improving the environment . five priority goals among the Sustainable Development tries . NOVATEK today is Russia’s major independent gas Our corporate strategy favors cleaner-burning natural Goals that we will do our best to achieve . Among them producing company and ranks third globally among public The reporting year also saw the final investment decision, gas and already accounts for 83% of NOVATEK’s hydrocar- are following goals: Good health and well-being, Quality companies in terms of proved natural gas reserves . Our or FID, made on our second large-scale LNG project — bons production . We intend to further grow this share as education, Affordable and clean energy, Decent work and key competitive advantage is our high-quality, long life Arctic LNG 2 . The project envisages the construction of we increase our LNG production up to 70 mmt per annum economic growth, and Climate action . resource base combined with low operating costs, as well three liquefaction trains each producing 6 .6 mmt of LNG by 2030 . as our commitment to excellence . per annum, or 19 .8 mmt per annum, and capacity of up to We are convinced that natural gas via pipeline or LNG can 1 .6 mmt of stable gas condensate per annum . We laid the foundation for a resolute transition to meet most of the world’s growing energy needs . It’s the The past year was no exception . Our revenues grew by a low carbon business model in our corporate strategy lowest-carbon fossil fuel and a viable energy source for 3 .7% to RR 863 billion, our normalized EBITDA increased We are extremely proud of our success at Yamal LNG and presented in 2017 . As climate change affects everyone substituting coal, fuel oil and diesel in the energy mix . We by 11% to RR 461 billion while our normalized profit rose see big opportunities to develop a world class LNG plat- and all the companies globally, the transition to natural need to meet the challenges of modern society’s call for by 5 .2% to RR 245 billion . Our flagship project Yamal LNG form on the Yamal and Gydan peninsulas . We will evolve gas decreases emissions and lessens the carbon foot- conscious energy consumption and clean energy . demonstrated exceptional efficiency and unprecedented our Company’s strategy to meet the global challenges — print . It is one of the top global issues impacting society success on the global market . Two thousand and nineteen economic and environmental alike . Our business objective today . Understanding and recognizing the need to prevent Besides climate change, we treat other environmental represented the first full year of simultaneous operation responds to the demands for a future where everyone can a climate scenario with temperatures growing by more aspects of our activities with utmost responsibility . Our key NOVATEK Sustainability Report 2019 6 | 7 goals are sustainable use of natural resources and miti- We have always cared and will care for our employees gation of environmental risks . We put much effort into providing them with career and personal development reducing our environmental footprint and strive to preserve opportunities and offering them multiple social support land, water resources and biodiversity . programs . Training and professional development help us build a high-quality succession pool, improve employee NOVATEK understands our social responsibilities and chal- loyalty and enable advancing of the Company’s team skills lenges in the main region of our operation . The Company’s and experience . In 2019, about 6,000 employees