GAZPROM GROUP’S SUSTAINABILITY REPORT 2017 KEEPING THE BALANCE GAZPROM GROUP’S SUSTAINABILITY REPORT 2017 KEEPING THE BALANCE TABLE OF CONTENTS Message from Gazprom CEO ________________________________________________________________________________ 4 About the Report ___________________________________________________________________________________________ 8 Definition of Material Issues to Be Covered in the Report ____________________________________________________ 9 Stakeholder Engagement _______________________________________________________________________________ 14 About Gazprom Group _____________________________________________________________________________________ 17 Business Model _______________________________________________________________________________________ 18 Gazprom Group’s Strategy ______________________________________________________________________________ 27 Sustainability Management _____________________________________________________________________________ 29 Corporate Governance _________________________________________________________________________________ 31 Countering Corruption _________________________________________________________________________________ 35 Procurement Management _____________________________________________________________________________ 38 Risk Management _____________________________________________________________________________________ 40 1. Production: Gazprom’s Contribution to National Development _____________________________________________ 49 1.1. Gas Supplies to Russian and International Consumers _________________________________________________ 52 1.2. Petroleum Products Supplies _______________________________________________________________________ 72 1.3. Taking Care of Future Generations: Hydrocarbon Reserve Replacement _________________________________ 80 1.4. Power and Heat Generation for the People ____________________________________________________________ 83 1.5. Support of Small and Medium-Sized Businesses by Gazprom Group _____________________________________ 87 1.6. Gazprom’s Production Innovations __________________________________________________________________ 90 1.7. Import Substitution _________________________________________________________________________________ 94 2 KEEPING THE BALANCE: PRODUCTION. ENVIRONMENT. PEOPLE 2. Environment: Sustainable Use of Natural Resources _____________________________________________________101 2.1. The Year 2017 is a Year of Ecology at Gazprom _______________________________________________________101 2.2. Environmental Sustainability Management ___________________________________________________________106 2.3. Mitigating Adverse Impact on the Environment _______________________________________________________116 2.4. Mitigating Climate Impact __________________________________________________________________________129 2.5. Energy Saving and Energy Efficiency: Saving Resources to Benefit the Planet ____________________________135 2.6. Gazprom Group’s Stakeholder Engagement in Environmental Protection ________________________________141 3. People: Decent Living and Work Standards ______________________________________________________________145 3.1. Gazprom Group’s Personnel _______________________________________________________________________146 3.2. HR Management at Gazprom Group ________________________________________________________________151 3.3. Industrial Safety Culture: Occupational Health, Industrial and Fire Safety ________________________________166 3.4. Gazprom Group’s Social Projects ___________________________________________________________________176 Appendix ________________________________________________________________________________________________190 Appendix 1. GRI Table _________________________________________________________________________________190 Appendix 2. Additional Indicators of Gazprom Group’s Activities ____________________________________________199 Appendix 3. Principles of Report Preparation _____________________________________________________________220 Appendix 4. Glossary of Abbreviations and Code Names Used in the Report _________________________________221 Appendix 5. Assurance of the Russian Union of Industrialists and Entrepreneurs ______________________________225 Appendix 6. Approval from FBK Grant Thornton ___________________________________________________________226 Contacts and feedback ____________________________________________________________________________________228 2017 | GAZPROM Group’S SUSTAINABILITY REPORT 3 MESSAGE FROM GAZPROM CEO Dear friends, Production efficiency, environmental stewardship, and care for people are equally vital to achieving sustainability. We organize our work with the view to balance these priorities. Gazprom’s reliable energy supplies give a powerful impetus to regional development across Russia. Making a flexible response to mounting demand, we increased natural gas production to 472.11 billion cubic meters in 2017, up 12.4% from the previous year. It was the most impressive yearly production growth in the Company’s history. Moreover, with 194.4 billion cubic meters of overseas gas exports, Gazprom set a new record. And we are determined to make sure that both current and future generations have access to those valuable resources. To that end, for 13 years running, through our exploration efforts, we have maintained incremental reserves which are consistently above production. In 2017, Gazprom’s gas reserves added 852.9 billion cubic meters. 1 Including the Group’s share in the production volumes of the entities in which Gazprom has made investments classified as joint operations. 4 KEEPING THE BALANCE: PRODUCTION. ENVIRONMENT. PEOPLE Russian gas is increasingly in demand, management system more effective: over which definitely proves the relevance the last few years, Group sites and facilities of that environmentally benign energy source. have significantly reduced the injury rate. Substituting natural gas for coal and fuel oil will benefit the environment and the climate. As part of its corporate social responsibility agenda, the Company builds sports and Being aware of our responsibility for clean healthcare facilities throughout the country, environment, we pursue an extensive restores historic and architectural landmarks, environmental agenda. More than 19,000 works closely with local communities, including activities were completed during 2017, which indigenous peoples of the North, supports was the Year of Ecology in Gazprom Group. vulnerable social groups, and sponsors The Company’s Environmental Management popular and professional sports. The year 2017 System (EMS) has been in operation for years marked a decade since the launch of the large- and is upgraded annually. The Environmental scale Gazprom for Children social program. Inspectorate is responsible for monitoring Within its framework, Gazprom Group has built Gazprom subsidiaries’ environmental or renovated over 1,600 sports facilities, which footprint. We take a comprehensive approach are currently available to more than 100,000 to disturbed land reclamation, biodiversity people. restoration, water pollution prevention, and waste management. The Company makes Gazprom makes its contribution to sustainable a significant effort to consistently reduce development by achieving its production greenhouse gas emissions. targets, protecting the environment and caring for people. As we keep this balance, we work Gazprom relies on its highly skilled personnel for the benefit of society and the whole planet. as its main driving force. With promising career growth opportunities and comfortable working conditions, our employees face the future with confidence. The Company is taking steps Alexey Miller, to make its comprehensive occupational safety Gazprom CEO 2017 | GAZPROM Group’S SUSTAINABILITY REPORT 5 GAZPROM’S POSITION IN NATIONAL Gazprom leads the S&P Global Platts Top 250 Global Energy Company AND GLOBAL ENERGY INDUSTRY Rankings for 2017 First among local peers to Pioneer commence underwater in the development gas extraction of Russia’s Arctic offshore resources Processes World’s largest half of domestic natural gas exporter natural and associated 12% gas output 11 % OF GLOBAL NATURAL GAS OF RUSSIA’S CRUDE OIL PRODUCTION – GLOBAL AND GAS CONDENSATE LEADER OUTPUT Owner of the world’s Operator largest underground of Russia’s Unified Gas natural gas Supply System (UGSS) storage capacity 17% 18% OF GLOBAL NATURAL GAS OF DOMESTIC OIL REFINING RESERVES – GLOBAL AND STABLE GAS LEADER CONDENSATE PROCESSING Owner of the world’s Largest domestic largest network heat energy of high-pressure producer natural gas trunk pipelines 68% 15% OF RUSSIA’S OF DOMESTIC POWER NATURAL GAS GENERATION OUTPUT Key natural Russia’s best energy company in terms ГАЗ gas supplier ОГНЕОПАСНО of corporate climate reporting and ГАЗ in Russia ОГНЕОПАСНО greenhouse gas emission reduction and the FSU strategy rated in the CDP Climate Performance Leadership Index 6 KEEPING THE BALANCE: PRODUCTION. ENVIRONMENT. PEOPLE GAZPROM’S POSITION IN NATIONAL Gazprom leads the S&P Global Platts Top 250 Global Energy Company AND GLOBAL ENERGY INDUSTRY Rankings for 2017 First among local peers to Pioneer commence underwater in the development gas extraction of Russia’s Arctic offshore resources Processes World’s largest half of domestic natural gas exporter natural and associated 12% gas output 11 % OF GLOBAL NATURAL GAS OF RUSSIA’S CRUDE OIL PRODUCTION – GLOBAL AND GAS CONDENSATE LEADER