THINK GREEN. THINK NATURAL GAS.
Sustainability Report 2020 Sustainability Report 2020 Contents
Letter from the Chairman of NOVATEK’s Energy Consumption and Efficiency...... 97 Management Board...... 4 Air Emissions...... 99 Waste Generation and Management ...... 102 Letter from the Deputy Chairman of NOVATEK’s Water Use and Discharge ...... 104 Management Board...... 6 Biodiversity Conservation and Disturbed Land Remediation...... 107 About the Company...... 8 The Company’s 2020 Achievements About the Company...... 10 in Environmental Protection ...... 111 Core Assets and Capital Structure ...... 10 Key 2020 Events...... 12 Procurement ...... 112 Business Model...... 14 Procurement and Supply Chain Management ...... 114 Sustainable Development Highlights ...... 16 Procurement Performance...... 116 Industry-Related and International Activities ...... 20 Import Substitution...... 116 Innovation...... 22 Social Investments ...... 118 Sustainable Development Strategy ...... 26 Contribution to Russian Regions Development...... 120 Our Approach to Sustainability...... 28 Educational Programs...... 122 Sustainable Development Strategy ...... 28 Support for Cultural Institutions...... 123 Sustainable Development Goals: Prioritization and Promotion of Sports...... 123 Contribution...... 30 Charity and Philanthropy ...... 123 The COVID-19 Pandemic’s Impact on Strategy...... 37 Employment Practices...... 126 Stakeholder Engagement...... 38 Employee Profile...... 128 Stakeholder Engagement Approach...... 40 Motivation and KPI System ...... 128 Stakeholder Engagement in 2020 ...... 42 Training and Development...... 130 Support to Employees...... 132 Business Ethics ...... 50 Effective Communication...... 132 Approaches to Business Conduct...... 52 Anti-Corruption and Prevention Employee Health, of Conflicts of Interest ...... 52 Occupational Health and Safety...... 134 Human Rights...... 54 Our Approach to Occupational Health and Safety. . . . . 136 Information Security...... 55 Operational Control ...... 137 Occupational Health ...... 138 Corporate Governance...... 58 Fire Safety, Civil Defense and Emergencies...... 139 Corporate Governance System...... 60 Work-Related Injuries...... 140 Remuneration to Members of the Board Accidents and Incidents ...... 141 of Directors and Management Board...... 67 OHS Training ...... 143 Internal Control and Audit...... 68 Risk Management...... 68 APPENDIX 1. About the Report...... 144 APPENDIX 2. Personnel Structure...... 148 Climate Change...... 74 APPENDIX 3. Key Environmental Climate Change Approaches...... 76 Performance Indicators...... 153 Risks and Opportunities...... 78 APPENDIX 4. Report Boundaries...... 155 Climate Protection Initiatives...... 83 APPENDIX 5. Compliance with the GRI Standards...... 157 Permafrost...... 86 APPENDIX 6. Compliance with SASB ...... 171 APPENDIX 7. TCFD Disclosure Index ...... 175 Environmental Performance and Protection...... 90 APPENDIX 8. Independent Auditor’s Assurance...... 177 Environmental Vision...... 92 NOVATEK’s Strategic Targets in Environmental Social Media and Contact Details...... 179 Protection ...... 93 Glossary...... 180 Environmental Monitoring and Control...... 96
3 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
102‑14 providing stability and reliability to the electricity power Moreover, we are studying the possibilities to expand grids as well as ensuring affordable energy for a growing low-carbon energy by producing ammonia and hydrogen, Letter from the Chairman of NOVATEK’s population. Denying the development of natural gas combined with carbon capture and storage technology. Management Board will negatively impact the 4+ billion people trying to We will also use hydrogen as a fuel mix with natural gas raise their standards of living in the emerging markets. and we are working with our strategic partners to further Fossil fuels has been the foundation for society’s lower our carbon footprint, especially in our strategic LNG “We will address climate actions advancement over the past century, leading to profound business. We signed cooperation agreements with leading on many fronts, including lowering changes in economic growth and the creation of modern global companies aimed at reducing GHG emissions and societies. We should not lose sight of this fact, and increasing our environmental efficiency. our own carbon emissions and instead, be proud of the industry’s contributions to this helping customers reduce their economic reality. In 2020, NOVATEK joined the Methane Guiding Principles CO emissions by expanding Initiative, a voluntary, international multi-stakeholder 2 One of NOVATEK key advantages is in its ability to partnership between industry and non-industry lower-carbon products and control the full LNG value chain, from upstream to end- organizations with a focus on priority areas for action providing cleaner energy”. customer delivery; hence, we are well positioned to along the natural gas value chain. The Company joined monitor, verify and deliver “Green LNG” cargos to the international oil and gas industry leaders and global market. NOVATEK’s core strategy as a natural gas and supporting organizations to achieve a goal to continually LNG producer implies greater involvement in developing reduce methane emissions within business activities, natural gas as a transport fuel both in Russia and abroad. increase transparency and implement regulations on This market segment represents significant incremental methane emissions. growth potential in the context of increasingly stringent LEONID MIKHELSON environmental standards. Today, the oil and gas industry is under severe pressure from many constituent groups, especially regulators with In 2020, we made advancements in both market their latest comments about instituting carbon taxes directions. Last year, our first small-scale LNG plant of 40 or restricting fossil fuel usage. In our opinion, forcing a Dear Stakeholders, correct. The climate change debate is a major global thousand tons per annum was launched in the Chelyabinsk change through the regulatory process will not solve the challenge that require full international cooperation to Region to create incremental, environmentally friendly gas climate change agenda. We must all look seriously at the We are honored to present NOVATEK’s 14th Sustainability address the issue of decarbonizing society. NOVATEK will demand for the transport sector. We also successfully full cause of carbon emissions globally. The consumption Report 2020, providing insights to our non-financial play a major role in reducing the negative impacts caused launched our first carbon-neutral LNG fueling station of carbon intensive goods are one of the leading causes disclosures to help a wide range of stakeholders learn by carbon emissions as our business activities are aligned in Germany. Carbon neutral offsets from a carefully of carbon emissions globally and addressing this question more about the NOVATEK’s sustainable business principles to react dynamically to these changing issues in a socially selected portfolio of emission reduction projects, from only the producers’ side will not abate or mitigate and the Company’s economic, environmental and social and environmentally responsible manner. including wind generation projects in developing countries, the problem. The task of tackling climate change is performance. are used to compensate for the LNG’s carbon footprint bigger than any single company. Everyone worldwide, from NOVATEK’s participation in building a low-carbon future sold to end-customers. consumers, to businesses, to governments, must play an Despite the fact that 2020 was marked by various is consistent with the goals established by the Paris integral part in reducing global GHG emissions. unprecedented economic and societal challenges Climate Agreement. We will address climate actions on NOVATEK is one of the leaders in the global oil and gas related to the COVID-19 pandemic, NOVATEK maintained many fronts, including lowering our own carbon emissions industry in terms of carbon efficiency due to our high Our shared core values with society, our strong focus its commitment to creating long-term value for all and helping customers reduce their CO2 emissions by share of natural gas in the production mix. Our carbon on corporate governance and transparency and our stakeholders, and once again confirmed our status as a expanding lower-carbon products and providing cleaner intensity per 295.1 kg of CO2e/boe is below the global commitment to minimizing our environmental footprint responsible employer and business partner, implementing energy. We firmly believe that our low-carbon strategy average and represents one of the lowest levels of and mitigating carbon emissions defines our investment projects and initiatives to protect the environment and offers us a strong competitive advantage relative to our GHG emissions among oil and gas companies, both case and underscores our commitment to the basic develop local communities. peers, as well as creates economic and societal value for domestically and internationally. Our LNG production is principles of ESG. all our stakeholders. one of the cleanest among LNG projects globally at 0.24
During this period of uncertainty and market instability, tons of CO2e/ton of LNG produced. We intend to sustain ESG is an important part of our underlying core we remained committed to ensure the health and In 2020, we adopted the corporate theme these leading positions going forward by introducing low- business philosophy and we will continue to expand safety of our employees and their families, as well as our “THINK GREEN. THINK NATURAL GAS.”. We felt this carbon solutions into our operations. our sustainability disclosures as well as ongoing contractors and suppliers. NOVATEK worked closely with statement best reflects the core nature of our business engagement with our stakeholders, our employees and federal, regional and local authorities, as well as with our as a major natural gas producer and redefines our In 2020, NOVATEK’s Board of Directors approved the the communities of the regions of our operations. We are partners, to contain the spread of the coronavirus, and intention to producing and delivering clean-burning natural Company’s Environmental and Climate Change targets committed to the highest ethical standards to underlie took appropriate measures, where necessary, to minimize gas via low-carbon LNG. for the period up to 2030, and we believe our goals are our effective corporate governance structure as we possible disruptions in our production output, and to reasonable and reflect our low GHG emissions intensity expand our operations domestically and internationally. ensure the stability of our business activities. Since the We remain fully committed to deliver up to 70 million tons level. NOVATEK will positively contribute to lower our onset of the COVID pandemic, we paid RR 4.8 billion on of LNG by 2030 according to our corporate strategy emissions targets as our growing LNG and natural gas The pandemic of the past year was challenging for the implementation of anti-epidemic measures including and believe that long-term LNG demand will remain platform is one of the cleanest globally. everyone in society, yet our highly valued employees regional and local support. robust even under any of the net zero carbon scenarios, met these challenges and ensured the continuity of our with the largest demand growth coming from the Asia Last year, we implemented new APG technology to inject business operations. We are very proud of our team at The key pillars of our Corporate Strategy issued in 2017 Pacific markets. The pathway forward for NOVATEK to the associated gas into the deeper absorbing geological NOVATEK, and efforts made over the past year. We believe were primarily based on the global shift to low-carbon assist countries in pursuing their net zero targets and horizons at the Yarudeyskoye field. The Company makes we are well positioned to meet the future challenges of economies and the role of natural gas in the future transition from coal-fired generation is through delivering every effort to ensure the rational APG utilization and this climate change and reducing our carbon footprint, and energy mix considering climate change initiatives. Our natural gas. development achieved a significant positive environmental we hope that our 14th Sustainability Report reflects the strategic vision on LNG and its major role in answering effect by reducing 1.2 million tons of CO2 equivalent into efforts we have made in this important area. three fundamental questions on energy affordability, Natural gas will play a leading role in the energy transition the atmosphere and allowed us to achieve a 96.2% APG energy security and energy sustainability proved to be towards a low-carbon society for many decades, utilization rate for the whole Company.
4 5 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Letter from the Deputy Chairman of NOVATEK’s reducing GHG emissions on the Group level and proves an assessment to define the material topics within the Management Board our low-carbon intensity position among our global oil preparation process of our Sustainability Report. A new and gas peers. During 2020, our Scope 1 GHG emissions section on the Company’s innovations was included based also declined by 19% mainly due to the increase in APG on the feedback received on a questionnaire sent to utilization and the implementation of energy efficiency stakeholder’s representatives. NOVATEK systematically initiatives. conducts R&D activities in the field of geological “In 2020, NOVATEK’s Board of exploration, drilling, production and processing of Directors undertook vital decisions In addition, our specific GHG emissions were lower than hydrocarbons. The Company’s specialists have developed our 2019 baseline: our upstream segment decreased and implemented unique technologies, some of which toward directing the Company by 31%, our processing segment by 9% and our LNG are used for the first time in the world. New technologies to address the issues of global production by 8%. These results represent a notably allow us to increase the economic efficiency of our climate change by establishing reduction in our GHG emissions year-on-year. We want production activities. to reiterate that our operational strategy of producing Environmental and Climate Change more natural gas, not less, will contribute meaningfully to In addition, a separate section on cyber security risks
targets to reduce GHG emissions”. reducing global CO2 emissions, not only by implementing was included in our 2020 Sustainability Report where our GHG management framework, but mainly due to we disclose NOVATEK’s systematic approach to ensure the benefits from coal-to-gas switching. We believe our information security and integrity, and to adopt best pathway forward to increase our LNG production will make practices in this important area as digitization increases
a notable contribution to reducing CO2 emissions for many throughout our operations. decades and is a key component of the “Environmental” part of our ESG story. We made significant progress in improving our external MARK GYETVAY sustainability ratings. The majority of ESG rating agencies Our 2020 Report includes new GHG disclosures such as upgraded NOVATEK’s ESG rating over the past year. The the breakdown of Scope 1 emissions by source, methane most recent and probably the most significant upgrade emissions intensity and our Scope 3 emissions calculated came from MSCI ESG Ratings that upgraded our rating Dear Stakeholders, information on the Group’s approach to climate change based on the use of Company’s production volumes. from “BBB” to “A”. We are the first and only Russian oil and and climate risk management. The external assurance Moreover, our 2020 GHG emissions under Scope 1 and 2 for gas company to receive an “A” ESG rating from MSCI. In This past year was an unprecedent time for society as was conducted on the performance data relating to the first time was subject to and received independent addition, based on the 2020 assessments, our ESG ratings we dealt with the harsh realities of economic lockdowns our sustainability impacts, prepared in accordance with assurance verification. It is important that we fully were also raised both by Sustainalytics and S&P Global and the disruption to our normal ways of life. It was GRI Standards and, for the first time, included the SASB demonstrate our transparency in measuring, verifying and Corporate Sustainability Assessment. a landmark year for the ‘Social’ element of ESG1 as Standard. reporting our ESG results. the devasting impact of COVID-19 clearly showed how One of the primary focus areas of sustainable important people are to sustain business operations Our business strategy is aligned and consistent with We significantly increased our cryological disclosure development is managing the whole supply chain from despite the hardships endured by society. the Sustainable Development Goals (SDG) set by the as part of geotechnical monitoring due to the latest production to end-consumers. This entails looking at every UN General Assembly in 2015. We have implemented stakeholders’ awareness of Arctic permafrost incidents aspect of our business operations, including procurement We paid special attention to the health and wellbeing five priority goals within our environmental and social by other companies. Our main production facilities are of goods and supplies. In 2020, NOVATEK approved the of our employees, our contractors and the population programs: SDG #3 - Good health and Well-Being, SDG located in Russia’s Arctic territory with severe climatic Group’s Supplier Code of Conduct that details NOVATEK’s in the regions where we operate our production and #4 - Quality Education, SDG #7 - Affordable and Clean conditions in the area of permafrost. The Company expectations that all suppliers comply with the principles processing facilities. The Company’s rapid response to Energy, SDG #8 - Decent Work and Economic Growth, regularly assesses the climate change impact on its of business transparency and integrity, business ethics the problems and challenges brought by the pandemic and SDG #13 - Climate Action. We have embedded ESG operations, conducts geotechnical and environmental and sustainable development included in our Code, as ensured the continuity of production and contributed to principles as an integral part of our Corporate Strategy monitoring, developed a system for reporting GHG well as the guiding principles of the UN Global Compact, the protection of workers and local communities from the and strive to continuously improve our operations and emissions, and applies innovative technologies to reduce the International Labour Organization, the Declaration on effects of the COVID-19 spread. reporting across these dimensions. During the reporting emissions. We also take climate change scenarios into Fundamental Principles and Rights at Work, and applicable period, the Company prioritized the UN SDGs, selected account based on historical data surveys at the design environmental protection and industrial safety laws. Our focus on the safe operations and employee training targets, and developed internal goals that will help stages to account for climatic changes and its potential helped us improve our overall safety performance and achieve the maximum cumulative effect by 2030. impact on our facilities. At NOVATEK, we view sustainability as a journey, rather deliver another year with zero fatalities. Under our than a destination. We are proud of our current newly developed UN SDG target “Good health and well- In 2020, NOVATEK’s Board of Directors undertook vital The Company has voluntarily committed to regulate GHG results and determined to maintain our efforts with being” our work in the area of occupational safety is decisions toward directing the Company to address emissions and the environmental impact on permafrost, further enhancements of our sustainability practices. geared towards reducing the lost time injury frequency the issues of global climate change by establishing as well as to implement all possible measures to reduce Sustainability is a foundation of our Corporate Strategy, rate (LTIFR) with the annual decline of 5%. In 2020, the Environmental and Climate Change targets to reduce the impact on the atmosphere. We will also ensure past and present. We believe creating value is not LTIFR among the Group’s employees registered at 0.49, GHG emissions and air pollution throughout our liquids and that Arctic LNG 2 and our future LNG platform meets mutually exclusive from our responsibilities as good representing a 29% decline compared to 2019. natural gas value chains. We believe that setting realistic strict emissions standards, as well as reducing our stewards to the environment and societies where we targets within our corporate strategy period up to 2030 environmental footprint on the Arctic permafrost by operate, and therefore view our stakeholders more We prepared our Sustainability Report in accordance is far more impactful than broad, aspirational statements using the state-of-the-art, innovative GBS platforms. widely – including society, our employees and our with GRI Sustainability Reporting Standards, the Oil & up to 2050. This report contains our initial progress on Our engineers have extensively assessed all our facilities shareholders. We believe that taking a wider view that is Gas – Exploration & Production industry Sustainability achieving our Environmental and Climate Change targets. built in the permafrost areas, confirming the stability and relevant to a wider constituencies is key to the long-term Accounting Standard published by the Sustainability safety of these installations at our operations. resilience and value of our business. Accounting Standards Board (SASB). Our report is also Despite the increase of our hydrocarbons production, our aligned with the recommendations of the Task Force on Group’s GHG Intensity ratio decreased by 1% to 295 kg It is crucial that our content remains relevant to our
Climate-Related Financial Disclosures (TCFD) with detailed of CO2e per boe. This demonstrates a positive trend in stakeholders, so once every three years we undertake
1. ESG – Environmental, Social and Corporate Governance factors.
6 7 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
NOVATEK is ranked 3rd globally among publicly About the Company traded companies in proven natural gas reserves (SEC) and is ranked among the top-10 companies globally in natural gas production.
16.366 mmboe 7 7.4 bcm Total proved hydrocarbon reserves (SEC) Natural gas production as of 31 December 2020 in 2020
8 9 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
About the Company NOVATEK’s key strategic priorities are: Share capital structure,* % 102‑7 NOVATEK’s total capitalization as of 31 December 2020 102-1 102-2 102-3 102-5 102-6 • Ensuring development of the Company’s hydrocarbon 14% 12% Company name and legal form: Public Joint-Stock resource base and efficient reserves management; 19% The Bank of New York Equity Company NOVATEK Mellon** Debt • Increasing its hydrocarbon production; 7% OOO Ena Invest Headquarters: 2, Udaltsova Street, 119415, Moscow, Russia TOTAL E&P HOLDINGS • Maintaining a low-cost structure; RUSSIA 10% 1 NOVATEK is Russia’s largest independent natural gas 19% SWGI Growth Fund producer. • Optimizing marketing channels; (Cyprus) Limited OOO Gazprom Capital 15 56 rd 14% The Company is ranked 3 globally among13 publiclyFrequency traded • Building a low-cost, scalable LNG platform; and OOO Levit 88% 50 17% companies in terms of1.06 proved natural gas reservesrate of under injuries Other (less than 5% 10 the Security and Exchange Commission (SEC) reserves • Operating according to sustainable development each) methodology and is ranked among the 10 top companies principles. globally in terms of natural gas production. The Company 28 * According to the data contained in the list of persons entitled to participate in the General Meeting of Shareholders and holding at is also0.79 considered one of the lowest-cost0.81 producers in Creatingleast 5% of Sustainable the share capital/ordinary Value shares. Record date is 7 September 2020. the global oil and gas industry in key industry metrics ** The proportion of shares traded outside the Russian Federation in the form of global depositary receipts, or GDRs. regarding2018 finding and2019 development,2020 reserve replacement Core Assets2018 and 2019Capital Structure2020 Our corporate purpose is to create sustainable value for all our stakeholders across the entire value chain. costs and lifting costs. The Company’s share capital totals RR 303,630,600 102‑7 102‑45 NOVATEK plays a significant role in Russia’s energy sector: divided into 3,036,306,000 ordinary shares with a nominal NOVATEK’sFor NOVATEK, core creating assets sustainable as of 31 December shareholder 2020 value means: in 2020, the Company accounted for 11% of total Russian value of RR 0.1 each. NOVATEK shares are traded in Russian natural gas production. NOVATEK sells its natural gas on roubles on the Moscow Exchange. On the London Stock Exploration & production Russian midstreamSUSTAINABILITY & marketing InternationalMANAGEMENT: E&P & Other the Russian domestic market through the Unified Gas Exchange, NOVATEK Global Depositary Receipts (GDRs) are (E&P)AFFORDABLE, in Russia marketing SOCIAL VALUE Supply System and on international markets mainly in the traded in US dollars, each GDR representing 10 ordinary 100%SAFEOOO AND NOVATEK- CLEAN 100% BoardOOO NOVATEK-Purovsky of Directors 100%RemunerationNovatek Gas and & Power 100% OOO Sherwood Premier form of liquefied natural gas (LNG). shares. As of 31 December 2020, NOVATEK GDRs were ENERGYYurkharovneftegas3 ZPK NominationGmbH Committee Occupational health issued on 567,447,540 ordinary shares comprising 18.69% defines sustainable and safety for 100% OOO NOVATEK- 100% OOO NOVATEK-Ust-Luga 100% Novatek Green 100% Novatek Equity (Cyprus) 102‑4 of the Company’s share capital. Secure supplier development strategy; prepares personnel and Tarkosaleneftegas Energy Sp. z o. o.4 Limited NOVATEK’s main businesses are the exploration and of clean fuel performs risk recommendations to contractors production, processing, transportation and marketing As at the end of the reporting year, NOVATEK’s total 50% AO Arcticgas 100% assessment;OOO NOVATEK Moscow 100%supportNOVATEK the Board’s 100% OOO NOVATEK-Transervice Mitigating negative Creating decent jobs of natural gas and liquid hydrocarbons. The Company’s capitalization (total debt plus equity) as reported under monitorsRegion progress decision-makingMontenegro B. V.on environmental production assets are located mainly in the Yamal-Nenets IFRS was RR 1,860,567 mln. sustainability Tax payments 50%impactZAO Nortgas 100% OOO NOVATEK-Kostroma 100% Novatek Gas & Power 100% OOO NOVATEK-Murmansk Autonomous Region, one of the largest and most prolific Asia Pte. Ltd. Educational natural gas regions in the world. Implementation of Sustainability Working programs Changes to the Company’s structure 51%energy-efficientOOO Yargeo 100% GroupOOO involving all 100%SustainableNovatek Development Lebanon SAL 100% ООО NOVATEK-Energo NOVATEK-Chelyabinsk The NOVATEK Group joint ventures, Yamal LNG and technologies functional departments Division Supporting local Cryogas-Vysotsk, produce liquefied natural gas at their 102‑10 50,1% OAO Yamal LNG 100% OOO NOVATEK-Perm 50,1% Yamal Trade Pte. Ltd. 50,1% OOOcommunities Sabetta International in the Biodiversity LNG plants. Our sales of natural gas on international In Q4 2020, the NOVATEK Group sold 100% of its interest in determines focus areas coordinates 3 27 79.6 Airportregions of operation 2 conservation markets2,376 are sales1,919 of LNG purchasedClass primarily 1 – extremely from our ООО Chernichnoye to its joint venture ZAO Terneftegas. for sustainability efforts sustainability actions to 51% ZAO Terneftegas 100% OOO NOVATEK-AZK 100% OOOCharity NOVATEK-Kamchatka joint ventures. hazardous — 0.01% Occupational and coordinates ensure transparency and 2 Class 2 – highly During the reporting year, ООО North-Chaselskoye and 51% OOO Chernichnoye 51% departments’OOO Cryogas-Vysotsk relevant creation of long-term 100% OOO Maritime Arctic 49.6 safety Compliance with 47.2 1. Information contained in the Report compriseshazardous information— 0.06% on ООО Yevo-Yakhinskoye, both NOVATEK Group subsidiaries, efforts sustainable value for Transporthuman rights PAO NOVATEK, its consolidated subsidiaries and joint ventures (hereinafter jointly referred to as “NOVATEK”,Class 3 – the moderately “Company”, merged with AO NOVATEK-Pur and ООО NOVATEK- 100% OOO Arctic LNG 1 stakeholders 49% Rostock LNG GmbH “NOVATEK Group” or the “Group”). hazardous — 4.05% Yurkharovneftegas, respectively. 60% OOO Arctic LNG 2 100% OOO EkropromStroy 2. On 12 March 2021, an entry was madeClass in the 4 Unified – low State Register of Legal Entities about the dissolution of OOO hazardous — 90.84% 100% OOO Arctic LNG 3 100% OOO NOVATEK – Western Chernichnoye through its merger with ZAO Terneftegas. Class 5 – virtually Arctic5 42,889 non-hazardous — 5.03% 2018 2019 2020 100% ООО NOVATEK Scientific 100% OOO NORDPORT and Technical Center LONG-TERM SHAREHOLDER VALUE
6 100%ReturnAO NOVATEK-Pur on capital Responsible business Driving innovation 50% OOOResponsible SMART LNG business 100% OOO Obskiy LNG7 100% OOO Arctic Transshipment8 Climate change High economic Effective and transparent Information management value added corporate governance 100% Novateksecurity Asia Development Holding Pte. Ltd.
The growing market capitalization and total shareholder returns are driven by the Company’s sustainability 3. OOO Yevo-Yakhinskoye merged with OOO NOVATEK-Yurkharovneftegas on 1 October 2020. efforts4. Novatek as Polskawell as Sp. its z o.o.financial prior to and 3 February operational 2020. performance. 5. OOO NOVATEK – Western Arctic merged with OOO Arctic Transshipment on 26 February 2021, with the former renamed OOO Arctic Transshipment on 19 March 2021. 6. AO NOVATEK-Pur merged with OOO North-Chaselskoye on 20 July 2020. 7. On 10 June 2021, OOO Obskiy LNG was renamed OOO Obskiy Gas Chemical Complex. 8. On 26 February 2021, an entry was made in the Unified State Register of Legal Entities about the dissolution of OOO Arctic Transshipment through its merger with OOO NOVATEK – Western Arctic. Good Health Quality Affordable Decent Work 10 Climate Action11 and Well-being Education and Clean Energy and Economic Growth
NOVATEK’s Sustainable Development Strategy is aligned with the UN Sustainable Development Goals, with five SDGs prioritized by the Company. THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Key 2020 Events
Russia’s largest independent The first and only Russian oil and gas company natural gas producer to receive an “A” rating by MSCI ESG Ratings
Operational Highlights Social Highlights Environmental Highlights Financial Highlights
bln mmt USD bln % RR bln boe of CO e 16.4 16,821 9 2 57 50 392 OG1 Total proved reserves (SEC) Employees Direct GHG emissions Market capitalization Minimum target dividend Normalized EBITDA, including share payout level in EBITDA of joint ventures (IFRS)
bcm kg of CO2e 7 7.4 0 295.1 per boe 712 RR bln 35.56 RR 107,971 RR mln OG1 Natural gas production Fatalities among GHG Intensity ratio employees Total revenue (IFRS) Dividend per share Total declared dividend payout for 2020 mmboe % 608 1.6 RR bln 96.2 OG1 Total hydrocarbon APG utilization rate production Targeted social expenses for employees tons of CO e 2 201‑1 % per ton of Direct economic value generated and distributed in 2020, RR mln* 0.24 LNG 87.7 RR bln 4.1 GHG emissions per ton Light products yield achieved of LNG produced 737,252 RR mln at NOVATEK-Ust-Luga in 2020 Social expenses and compensatory payments Revenues RR bln RR 2.4 44.2 per boe RR bln 0.7 Environmental expenses (USD 0.61) Industry's lowest finding and development costs Spent in regional support in Operating Employee wages Payments to Payments to Community Economic value their COVID-19 response efforts costs and benefits providers of government by investments retained capital country
422,065 31,876 99,908 106,517 4,128 72,758 RR mln RR mln RR mln RR mln RR mln RR mln
No. No. % Distributed economic value
* Data is based on the following methodology: 3 7 11 • Revenues – total revenues plus interest income; Globally by proved Globally by natural Share of total • Operating costs – operating expenses less depreciation, depletion and amortization less asset impairment charges, less employee wages and benefits, less taxes other than income tax, and less community investments; gas reserves among gas production natural gas • Payments to providers of capital – dividends paid plus interest paid; publicly traded among publicly production • Payments to government by country – current income tax plus taxes other than income tax; and • Community investments – funds voluntarily directed by the Company to charity, sponsorship, support of local communities and not companies traded companies in Russia directly related to the activities of the Company or its employees.
12 13 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Business Model
Sales volume
international market domestic market LNG projects
LNG 12% 19% 35% Natural gas Crude oil LPG
65% 81% 88%
Producing fields Separation Natural gas by pipeline and treatment 75.6 bcm 4.5 mmt 3.0mmt
Crude oil by pipeline
22% Stable gas Unstable gas 27% condensate condensate Stable gas Petroleum by pipeline condensate products tankers 73% 100%
Purovsky Plant (nameplate mmt mmt capacity – 24% LPG 2.2 6.8 12 mmtpa) Stabilization of gas 64% Naphtha condensate
76% Stable gas Ust-Luga Complex condensate 7.0 mmt (nameplate capacity – 15% Jet fuel 6 mmtpa) 11.8 mmt Fractionation of stable gas 78% Stable gas condensate by rail condensate 11% Fuel oil
10% Gasoil
14 15 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Sustainable Development Highlights
2005 2006 2008 2011 2014 2017 2018
NOVATEK Integrated HSE NOVATEK NOVATEK’s Board of NOVATEK publishes NOVATEK presents its long-term NOVATEK starts integrating the UN NOVATEK wins the Vernadsky publishes its first Management completes its first Directors approves its Anti-Corruption corporate strategy up to 2030 Sustainable Development Goals (UN National Environmental Award Sustainability System compliant questionnaire the Company’s Policy SDGs) into its corporate strategy in the Innovative Eco-Efficient Report, externally with ISO for the Carbon Code of Business Technologies in Industry and assured by an 14001 and OHSAS Disclosure Project Conduct and Ethics Energy category with its independent auditor 18001 is developed (now CDP), a non- proprietary gas liquefaction and rolled out profit organization GHG Emissions Management technology “Arctic Cascade” that encourages System, a project implemented NOVATEK makes its first climate- large businesses to by the Company in 2017, wins the related disclosure consistent with report their GHG NOVATEK Vernadsky National Environmental the recommendations of the Task NOVATEK adopts its emissions completes its first Award in the Science for Ecology Force on Climate-related Financial Health, Safety and NOVATEK questionnaire for category Disclosure (TCFD) NOVATEK’s Sustainability Report Environment (HSE) publishes its first the CDP Water wins the “Change Management. Policy Sustainability Disclosure, detailing Visionaries” award for Report prepared its water usage and sustainability impact assessment in accordance related risks with the GRI non- NOVATEK is included in the NOVATEK starts preparing financial reporting FTSE4Good Index, with our ESG sustainability reports using the standards performance independently rated Standard for the Oil and Gas by Sustainalytics for the first time Industry developed by the US NOVATEK’s ESG performance is Sustainability Accounting Standards rated for the first time by S&P Board (SASB) and the Oil and Gas Global Corporate Sustainability Industry Guidance on Voluntary Assessment Sustainability Reporting (IPIECA/API/ IOGP, 2015)
16 17 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Sustainable Development Highlights
2019 2020
NOVATEK establishes a NOVATEK expands the mandate of NOVATEK’s Board of Directors NOVATEK becomes the first and NOVATEK’s Sustainability Report NOVATEK is awarded a special prize Sustainability Working Group, a the Remuneration and Nomination approves Environmental and only company in the Russian oil 2019 is selected as a Gold Winner “For Promoting LNG as Motor Fuel multi-disciplinary team involving all Committee to include sustainable Climate Change targets for and gas sector to be rated “A” in the “Best Writing” category and and Launching the First Multi-Fuel functional departments and led by development the period up to 2030 by MSCI ESG Ratings a Platinum Winner in the “Best Station in Russia” at the federal senior management Design” category by MarCom round of the MediaTEK 2020 Awards 2020, and wins a Gold awards, an all-Russian competition Award at the LACP 2020 Inspire held for media organizations, Awards Corporate Publishing press offices of energy companies NOVATEK’s Sustainability Report NOVATEK Group publishes its Novatek Green Energy launches its Competition in the “Print” and regional administrations and NOVATEK prioritizes five UN SDGs 2018 is selected as a Gold Winner Supplier Code of Conduct first carbon-neutral LNG fueling category for the second year supported by the Russian Ministry that are most relevant to its in the “Best Writing” category and station in Europe in a row of Energy business a Platinum Winner in the “Best Design” category by MarCom Awards 2019, and wins a Gold Award at the LACP 2019 Inspire NOVATEK identifies performance Awards Corporate Publishing targets for priority SDGs NOVATEK signs decarbonization NOVATEK’s Sustainability Report “The Health Territory”, “NOVATEK – NOVATEK sets targets for specific Competition in the “Print” partnership agreements with 2019 wins the Russian Ministry Step to Bigger Football” Indoor GHG emissions for the first time category major international holding of Energy award in the Best Football Cup among secondary companies, such as Siemens Public Non-Financial Report of school teams, and “Victory Flame” Energy, Uniper, Nuovo Pignone an Oil and Gas Company with projects win NOVATEK the “Best NOVATEK joins the Methane (a Baker Hughes subsidiary) 4,000–20,000 Employees Socially-Oriented Oil and Gas Guiding Principles, an international and NLMK Group Company” 2020 award from the initiative to cut methane emissions Ministry of Energy
NOVATEK’s Sustainability Report NOVATEK is rated “A2” (companies wins the “Change Management. A woman is elected to NOVATEK’s with a high level of commitment Visionaries” 2020 award from the NOVATEK is ranked 2nd in a Board of Directors for the first to anti-corruption compliance) by +1 media project for the Best sustainability ranking compiled by time the first national Anti-Corruption Sustainability Report Prepared in Expert magazine Ranking of Russian Business 2020 Accordance with GRI Standards compiled by the Russian Union of Industrialists and Entrepreneurs (RSPP) NOVATEK establishes its Department for Alternative Energy & Offshore Technologies
18 19 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Industry-Related and International Activities 102‑12 External initiatives
102‑13 Initiative Company engagement Membership and participation in industry associations International Labor Organization’s Declaration The Company shares the Declaration’s principles and incorporates them into on Fundamental Principles and Rights at Work its internal regulations No. Organization Year of joining UN Sustainable Development Goals (UN SDGs) The Company aligns its goals and programs with the UN SDGs. In 2019, 1. Scientific and Technical Council under the Working Group on Hydrogen Economy Development at the 2021 five UN SDGs were prioritized by the Company in line with its strategy and Ministry of Industry and Trade of the Russian Federation industry specifics to narrow the focus of our efforts
2. Council for Gas Infrastructure Development in Russian Regions under the Federation Council 2021 Extractive Industries Transparency Initiative The Company has applied EITI’s best practices in disclosure of its payments (EITI) to government by country1 3. Russian-Italian Committee of Entrepreneurs 2021 Methane Guiding Principles Under this initiative, the Company is implementing a range of practices and 4. Section on Legislative Support for Hydrogen Economy Development at the Expert Council under the 2020 procedures to account for, monitor and reduce methane emissions from Russian Federal Assembly’s State Duma Committee on Energy production, processing, storage and transportation of hydrocarbons 5. Arctic Economic Council 2020
6. Methane Guiding Principles, an international non-profit partnership 2020 International standards
7. Organizing Committee for the Arctic: Territory of Dialogue International Arctic Forum 2020 Standard Compliance by the Company
8. Supervisory Board of Murmansk State Technical University 2020 OHSAS 18001:2007 (or ISO 45001:2018) 10 out of 23 (43%) NOVATEK subsidiaries engaged in hydrocarbon production, transportation and processing are certified under OHSAS 18001 (or ISO 9. The Future of Natural Gas Association (Zukunft Erdgas e.V.), Germany 2019 45001:2018). The NOVATEK entities actively migrate their OHSAS 18001-compliant 10. International Group of LNG Importers (GIIGNL) 2019 occupational health and safety management systems to ISO 45001:2018
11. Natural Gas Vehicles Association 2019 ISO 14001:2015 9 out of 23 (39%) NOVATEK subsidiaries engaged in hydrocarbon production, transportation and processing are certified to ISO 14001:2015 12. Working Group on Energy Sector Development (Ministry of Energy of the Russian Federation) 2018 ISO 14064-1:2007 The Company’s corporate GHG Emissions Management System is tailored 13. Polish LPG Chamber (Polska Izba Gazu Płynnego) 2018 to its production processes, feedstocks and equipment. The system 14. Polska Platforma LNG 2018 complies with ISO 14064-1:2007 and Russian Government Resolution No. 504-R dated 2 April 2014, as well as the Guidelines for Calculating GHG Emissions 15. Moscow Annual Oil and Gas Conferences 2018 approved by Order No. 300 of the Russian Ministry of Natural Resources and 16. Advisory Council of the Central Development Commission 2017 Environment dated 30 June 2015
17. National Association for Technology Transfer 2017 Rankings and indices
18. Russian Drilling Contractors Roundtable 2017 Ranking/index Company engagement 19. Society for Gas as a Marine Fuel 2017 FTSE Russell Independent ESG rating and inclusion in the FTSE4Good Emerging Index 20. Union of Builders of the Yamal-Nenets Autonomous Region, a self-regulatory organization 2017 Institutional Shareholder Services (ISS) Independent ESG rating
21. Design Engineer (Association of Oil and Gas Design Organizations) 2017 MSCI ESG Ratings Independent ESG rating
22. Field Engineer (Association of Oil and Gas Engineering Survey Organizations) 2017 S&P Global Corporate Sustainability Assessment Independent ESG rating
23. European Association of Geoscientists & Engineers 2017 Sustainalytics Independent ESG rating Bloomberg ESG score Independent ESG rating 24. Board of Trustees of Innopraktika, a non-governmental institute for human-capital development 2017 Refinitiv ESG score Independent ESG rating 25. Working Group on Public-Private Partnership Development in the Cultural Sector at the Ministry of 2017 Culture of the Russian Federation Engagement International Independent ESG rating Vigeo Eiris Independent ESG rating 26. Expert Council of the State Reserves Commission of the Russian Federation 2016 RAEX-Europe Independent ESG rating 27. Eurasian Union of Experts on Subsoil 2016 CDP and CDP Water Disclosure Independent rating 28. Russian-Spanish Business Council 2016 Environmental transparency ranking of oil Included in the ranking 29. The Saint Petersburg International Mercantile Exchange 2015 and gas companies by WWF NOVATEK is a member of the Natural Gas Section; engagement in the Section Council’s activities RSPP’s sustainability indices Included in the Responsibility and Transparency and Sustainable 30. Russian-Chinese Business Council (NPO) 2015 Development Vector indices Transition Pathway Initiative Independent assessment of climate change management 31. Forum-Dialog (NPO) 2014 Interfax-ERA’s Fundamental Efficiency Included in the ranking 32. Polish LPG Association (Polska Organizacja Gazu Płynnego) 2010 Rating 2020, Oil and Gas, Production and 33. Society of Petroleum Engineers 2006 Transportation: Petroleum Production category
34. V.I. Vernadsky Non-Governmental Ecological Foundation 2005 1. The Company’s reports on payments to governments: http://www.novatek.ru/en/development/Governments/.
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Innovation In 2017, the Company launched the Innovator Corporate of advanced technologies for seismic data processing • solution development to phase out fire towers with Idea Management System to automatically collect and and analysis, as well as the development of 3D geological firewater monitors (for cooling process equipment) in process employee suggestions for business improvement and hydrodynamic field models contribute to highly cost- favor of using stationary irrigation systems to reduce Approaches to innovation and development, including efficiency proposals. The effective development of hydrocarbon fields with complex the land footprint of a site facility and cut construction system also aims to enhance employees’ intellectual reserve structures. and maintenance costs for complex fire equipment; and NOVATEK’s consistent research and development efforts potential as the most valuable ideas are rolled out are focused on geological exploration, drilling, production, company-wide in a variety of areas, including but not The deployment of advanced technologies for gathering • solution development to combine water intake for treatment and processing of hydrocarbons. NOVATEK limited to production and management. and interpreting data on geological features is a key operational and firefighting needs with the discharge specialists have developed and are rolling out unique focus area for NOVATEK Scientific and Technical Center, of treated wastewater into surface water bodies for technologies, some of which are global-first innovations. By During 2020, more than 260 ideas to streamline the enabling it to support planning and implementation of more reliable winter operation, as well as to reduce own leveraging new technologies, the Company further improves operating processes, reduce costs and implement new exploration and drilling campaigns. NOVATEK Scientific electricity consumption in fish protection. the economic performance of its operations. ways of working were submitted by employees of PAO and Technical Center is involved in a comprehensive NOVATEK and its 21 subsidiaries. More than 1,070 ideas research on oil and gas bearing prospects in the Arctic The Company’s innovation activities are guided by Russian have been submitted over the four years since the project zone, providing scientific and methodological support for Innovations in production, exploration and international law, including Federal Laws No. 127-FZ launch, with 200 of them approved for implementation a regional project to build a consolidated model of the and development “on Science and State Scientific-Technical Policy”, No. 7-FZ and 89 ideas implemented, generating a total economic Gydan Peninsula, the north-east Yamal Peninsula, Gydan “on the Environmental Protection”, No. 261-FZ “on Energy benefit of over RR 4.3 bln. Bay, and Yenisei Bay. NOVATEK’s exploration campaigns are focused on replacing Saving and Energy Efficiency Improvement”, No. 187-FZ and expanding its proved reserves. The Company’s “on the Security of Critical Information Infrastructure In 2020, NOVATEK Scientific and Technical Center focused systematic and holistic approach to the development of of the Russian Federation” and No. 2395-1 “on Subsoil, Innovation focus areas its research efforts on the following projects: hydrocarbon resources allows the Company to find, explore as well as Executive Order of the Russian President” for and produce hydrocarbons in the most efficient and No. 666 “on Reduction of Greenhouse Gas Emissions” NOVATEK is driving innovations across a number of areas, • refinement of methods for quantitative accident risk cost-effective manner possible. The concentration of the dated 4 November 2020. including geological exploration, field development, well assessment in LNG production, including the subsequent Company’s producing and prolific fields in the same gas- technologies, oil and gas production, alternative energy, development of Safety Guidelines in this area. The rich Yamal-Nenets Autonomous Region provides favorable NOVATEK develops internal documents regulating the information security, and occupational health and safety. development of this methodology will significantly opportunities for increasing shareholder value with a Company’s innovation activities, with alternative energy reduce hazard zones in accidents, lowering the loads minimum level of risks and at low production cost. programs and policies starting to be developed in 2020. on buildings permanently occupied by employees and In particular, we tentatively identified focus areas for NOVATEK Scientific and Technical Center mitigating the need for reinforced building elements; The main objectives in upstream research are to reduce our alternative energy strategy, such as modern carbon losses in technological operations, facilitate effective capture and storage methods and technologies, as well as NOVATEK has the facilities and resources to process • development of special technical requirements for exploration and production in challenging conditions,
CO2 processing into value-added products (e.g., methanol, primary data, develop and constantly update field laying fiber-optic lines in the same trench with in-field improve equipment reliability, design production and building materials and thermoplastics). The Company models during field exploration and operation. NOVATEK gathering pipeline systems to avoid extra trenching and treatment facilities using energy-efficient equipment, and reviews the results of R&D projects on developing effective Scientific and Technical Center was set up in 2010 with the save on land allotment for pipelining; ensure environmental compliance. hydrogen storage and transportation technologies, as well main purpose of providing geological, geophysical, and as compares existing industrial technologies for hydrogen processed field data required for building up the resource • development of special technical requirements to The Company widely applies advanced technical solutions production from natural gas, exploring the options for base and furthering field development. NOVATEK Scientific replace hydrotesting of in-field pipelines with high- aimed at improving energy efficiency: frequency- driving cost optimization while controlling the technologies and Technical Center has been implementing a concept pressure pneumatic tests to eliminate the need for controlled electric drives for pumping and compressor for CO2 emissions. for building a corporate geological data bank. The use complex post-test water disposal systems; equipment, efficient automatically controlled electric lighting and electric heating systems, LED lighting installations, to name a few solutions.
22 23 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
By driving innovations in production, exploration and field • designing a 450-ton environmentally friendly drilling • carbon capture and storage, including reservoir Currently, our efforts are focused on the following areas: development, the Company has achieved a consistent rig to minimize the environmental impact from drilling injection. The first carbon capture and storage projects track record of successes: under prospective projects and to reduce the carbon can be implemented at Yamal LNG and Arctic LNG 2; • review of alternative energy development areas that footprint. As part of the Company’s environmental offer synergies with the Company’s core business • one of the first companies in Russia to pioneer drilling strategy implementation, existing technical solutions • partial substitution of fuel gas with hydrogen (with (natural gas and LNG production); horizontal gas wells; were explored for future LNG project production drilling a lower carbon footprint) – the project is at the program to meet the zero-discharge requirements for preliminary design stage for deployment at Yamal LNG; • analysis of key competitive advantages of the
• introduced multilateral well production technology at oil drilling and minimize CO2 emissions into the atmosphere; and Company’s alternative energy business; these and gas fields; advantages include low-cost production of gas used in • prioritizing the use of full-flow separators and multi- • renewable power generation. hydrogen production, the huge potential of geological • started to develop of Achimov horizons with a record- phase flow meters to enable well surveys that release formations on the Yamal and Gydan peninsulas to
breaking drilled well in the Russian gas industry; no hydrocarbons into the atmosphere. The impact An important technological feature of the large-scale store captured CO2 to reduce GHG emissions, and
achieved includes the utilization of gas reserves that Arctic LNG 2 project, which sets it apart from the the possibility of using CO2 to increase condensate • applied modern flow stimulation technologies including would have been burned in well studies and reduction of geographically close Yamal LNG project, is the use of recovery;
multistage hydraulic fracturing of a horizontal wellbore; CO2 emissions into the atmosphere; and gravity-based structures (GBS) to place LNG and stable and gas condensate production trains. Russia’s first LNG • preliminary budget estimates and viability assessment • application of engineering solutions to accelerate well plant to use GBS is manufactured at our unique LNG for alternative energy projects; • advanced frictional desorption technology was used construction through closer well spacing in complex Construction Center in the Murmansk Region. The new during the development of the Yurkharovskoye field, hydrography typical of the Arctic zone. This change technologies used in the project will significantly reduce • review of the Company’s existing assets and projects which includes an efficient process to recycle drilling in well spacing substantially reduces a facility’s land its capital intensity while minimizing its environmental in terms of the adoption of environmentally safe and mud for secondary use on a hydrocarbon basis and footprint and the input of materials and labor, thus impact. The GBS-based project can be viewed as an cost-effective offshore development technologies, as minimize waste, and as a result, the low-toxic oil from cutting the construction time and cost. The distance optimal solution in terms of minimizing air pollution in the well as offshore field facility construction in the Ob Bay rock cuttings is later reused in a drilling mud. between wells is determined as per the fire safety code, sensitive area of the Gydan Peninsula and the Ob Bay (North-Obskoye field, Geofizicheskoye field, etc.); and and closer spacing is made possible through the use of water area. In addition, the GBS platforms are not based NOVATEK has an increased focus on digitalization of compensating solutions, such as thermal stabilization, on piles as they are installed on the seabed close to the • selection of technologies for the development of fields various workflow steps. Starting from 2019, drilling and downhole shut-off valves, and remote control of shoreline. By using the GBS platform, which is only 25% located in the Ob Bay water area based on the least downhole treatment operations have been consistently well valve blocks that provide fire safety. Smaller the size of the Yamal LNG liquefaction train, the Company environmental impact criterion and the use of zero- and comprehensively digitized, involving the use of land footprints reduce anthropogenic environmental minimizes its impact on permafrost. emissions technologies in operations (reinforced GBS, artificial intelligence technologies. These technologies impacts, particularly in permafrost areas. subsea production systems, etc.). enable real-time reliable data-driven decision-making, The key benefits of using GBS technology: aimed at lowering accident and complication risks. In The Group’s operations use cogeneration technology, addition, in 2020, an ongoing digitization effort was almost doubling fuel efficiency to achieve lower fuel gas • low level of a plant’s environmental impact (compared Innovations in information launched for seismic operations to minimize downtime consumption and a significant reduction in GHG emissions. to other platform options); security during the field season through faster decision-making The Group’s fuel efficiency ranges between 85% and and improve the quality of raw seismic data. 90%, reducing the volume of combustion products and in • high energy efficiency; NOVATEK takes a systematic approach to information particular GHG emissions. security, striving to meet the highest standards in this In 2020, NOVATEK focused its research efforts on • minimal land footprint of a plant’s onshore facilities; area. production, exploration and field development in the In 2020, to maintain reservoir pressure and increase following areas: oil recovery at the Yarudeyskoye field, reinjection of • minimized industrial accident rates at a plant; In 2020, we focused on designing a project to build a associated petroleum gas (APG) was introduced, driving corporate monitoring center to centralize the detection • implementing “unmanned” technologies – a remote APG utilization to over 98% across the field and 96.17% • an LNG or stable gas condensate plant can be installed of information security incidents, as well as detect and control and monitoring system for the technological across the Company while reducing GHG emissions by within a short timeframe; prevent any impact from cyberattacks against critical
process of hydrocarbon production from wells, enabling 1.2 mmt of СО2 equivalent. The Group’s APG utilization information infrastructures of NOVATEK subsidiaries and capital investment optimization for infrastructure totaled 5.1 bcm in 2020. • a plant’s core components can be towed over long joint ventures. projects; distances; and
• using self-contained zero-emission power sources Innovations in LNG project design • a plant’s core components can be reused at a new Innovations in occupational on remote pads with multiple gas wells (such as and operation location. health and safety photovoltaic solar panels and wind turbines), enabling capital investment optimization when considering When designing LNG projects, the Company follows its NOVATEK is fully committed to putting the life and health high-voltage line projects to address inadequate policy of using advanced, effective yet proven technical Alternative energy of its employees above operational results and is aware infrastructure; solutions, which helps minimize the risks of below-design innovations of its responsibility for ensuring accident-free operations performance. NOVATEK also pays significant attention to and safe working conditions for its employees, as well as • developing a defect elimination technology for oil research achievements in reducing the carbon footprint The climate change challenge is a critical topic for the oil for protecting the health of the population in its regions pipelines that requires no maintenance shutdowns to of LNG production. and gas industry. NOVATEK is actively working on effective of operation. avoid freezing of pumped oil while eliminating oil pipeline and economically viable solutions in this area. Hydrogen defects; The main priorities in LNG project upgrades: technologies, as well as the renewables offer high In 2020, the COVID software solution was developed and potential for global GHG emissions reduction, so further implemented on a 1C platform to control the COVID-19 • using 3S separation technology, with gas passing • improving energy efficiency in operations including efforts are needed to enhance and adapt them for use in situation. This software solution allows us to track the through the unit reaching supersonic speed and thus through increased flue gas heat recovery and more the Arctic zone. For this purpose, NOVATEK is developing rate of COVID-19 cases among the personnel and testing improving the quality of gas dehydration and separation efficient gas turbines. The project is implemented at its alternative energy strategy for the medium and activities, identify those who are sick, and monitor of liquid hydrocarbons; Yamal LNG and was at the preliminary design stage as longer terms, establishing goals and objectives, as well as their recovery. The use of this software enables timely at the end of 2020; ranking and prioritizing projects for implementation. responses and helps avoid unfavorable scenarios.
24 25 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020 Sustainable Development Strategy
5 10 22 In 2020, we selected UN SDG targets and developed our Priority UN SDGs Targets within NOVATEK’s quantitative priority UN SDGs and qualitative own performance targets that performance targets will help achieve the maximum within priority UN SDGs cumulative effect by 2030.
26 27 14% 12% 19% The Bank of New York Equity Mellon** Debt 7% OOO Ena Invest TOTAL E&P HOLDINGS RUSSIA 10% 19% SWGI Growth Fund (Cyprus) Limited OOO Gazprom Capital 15 56 14% 13 Frequency OOO Levit 88% 50 17% 1.06 rate of injuries Other (less than 5% 10 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020 each)
28 0.81 Our0.79 Approach to Sustainability All of the above indicates the Company’s commitment to Creating Sustainable Value conducting business responsibly and its focus on driving NOVATEK2018 has taken an2019 ESG-driven approach2020 to sustainability, sustainable growth2018 over the2019 long term. 2020 Our corporate purpose is to create sustainable value for all our stakeholders across the entire value chain. embedding ESG factors1, i.e., environmental protection, social impact and corporate governance, in its business strategy. Sustainable development is one of the key elements of the For NOVATEK, creating sustainable shareholder value means: Company’s corporate strategy 2018 to 2030. Sustainable Development Strategy SUSTAINABILITY MANAGEMENT: NOVATEK’s corporate purpose is to create sustainable The Company’s sustainability strategy is part of its overall AFFORDABLE, SOCIAL VALUE value for all stakeholders along the entire value chain. business strategy and is built around society’s urgent SAFE AND CLEAN Board of Directors Remuneration and need for change towards low-carbon development. ENERGY Nomination Committee Occupational health The Company has prioritized the following sustainability NOVATEK’s contribution to a low-carbon future in line defines sustainable and safety for areas within ESG: with the Paris Agreement goals of limiting the increase in Secure supplier development strategy; prepares personnel and global average temperatures to 1.5 °C is currently one of of clean fuel performs risk recommendations to contractors Environmental protection: climate change the Company’s key strategic focus areas. assessment; support the Board’s Mitigating negative Creating decent jobs action, carbon footprint reduction; energy monitors progress decision-making on environmental efficiency; minimizing waste, discharges and As part of global decarbonization efforts, climate agenda sustainability Tax payments impact emissions; water saving; preserving biodiversity and Russia’s approved Energy Strategy to 2035, NOVATEK Educational across the Company’s footprint; deployment is implementing climate change mitigation and adaptation Implementation of Sustainability Working programs of technologies that contribute towards our measures and incorporates these aspects into its energy-efficient Group involving all Sustainable Development environmental goals. decision-making process. technologies functional departments Division Supporting local communities in the Biodiversity Social policy: respect for human rights when determines focus areas coordinates regions of operation 3 27 The strategy covers the following79.6 energy transition goals: conservation 2,376engaging1,919 with all stakeholders;Class 1occupational – extremely for sustainability efforts sustainability actions to Charity health and safety; employeehazardous care, including — 0.01% • Setting Environmental and Climate Change targets Occupational and coordinates ensure transparency and decent working conditionsClass and 2a –range highly of (adopted in 2020); departments’ relevant creation of long-term 49.6 safety Compliance with 47.2 employee benefits; employeehazardous training — 0.06% and • Reducing carbon footprint; efforts sustainable value for human rights development; support for Classlocal 3communities, – moderately stakeholders including through effectivehazardous dialogues. — 4.05% • Improving energy efficiency; Class 4 – low • Driving innovation in carbon emissions reduction and Governance: combating corruptionhazardous in— 90.84%all its adoption of zero-carbon technologies; forms; ethical conduct; responsibleClass 5 – virtually supply chain; fair 42,889executive compensationnon-hazardous linked — to5.03% KPI • Alternative2018 energy development2019 (hydrogen,2020 renewables); achievement; transparent tax strategy; gender • APG utilization; and LONG-TERM SHAREHOLDER VALUE balance in governance bodies, including the Board of Directors. • Carbon capture and storage. Return on capital Responsible business Driving innovation Responsible business
Climate change High economic Effective and transparent Information Our commitment to sustainability and special emphasis In 2020, NOVATEK’s Board of Directors approved the management value added corporate governance security on ESG not only boost our profile but also increase Company’s Environmental and Climate Change targets the market value of our business. Indeed, most major for the period up to 2030 and established a separate international investment funds divest from companies business unit – the Department for Alternative Energy that fail to meet sustainability criteria or to act on the & Offshore Technologies, which includes the Alternative global agenda issues such as climate change, responsible Energy and Hydrogen Division. In 2020, the Company joined The growing market capitalization and total shareholder returns are driven by the Company’s sustainability supply chains and human rights. Responsible stewardship the Methane Guiding Principles global initiative to drive the efforts as well as its financial and operational performance. of environmental and social topics along with strong achievement of its methane emissions reduction targets. economic performance indicate an overall strength of the Company’s governance and highlight its commitment The Company continuously steps up its sustainability to sustainability, driving the market capitalization of its efforts and implements strategic initiatives which also business as well. meet the demands of the wider global community. For Good Health Quality Affordable Decent Work Climate Action example, in 2020, a woman was elected to NOVATEK’s and Well-being Education and Clean Energy and Economic Growth At NOVATEK, decisions on sustainability issues are Board of Directors for the first time. In 2020, the taken at the highest corporate level, with the Board of Company’s management approved the NOVATEK Group’s Directors and executive committees actively involved Supplier Code of Conduct including recommendations NOVATEK’s Sustainable Development Strategy is aligned with the UN Sustainable Development Goals, in sustainable development management. The ultimate and principles of business transparency and integrity, with five SDGs prioritized by the Company. responsibility lies with the Board of Directors, which sets business ethics and sustainable development which the strategic vision and defines the key focus areas NOVATEK expects its suppliers to follow. for our sustainability programs. The list of KPIs for top management also includes ESG factors such as the HSE In 2021, the Company maintained its focus on global Management System performance index, which also decarbonization issues and set carbon footprint reduction covers climate change management. targets within its priority SDGs 7 and 13.
1. ESG – Environmental, Social and Corporate Governance factors.
28 29 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Sustainable Development Goals: Sustainability report when reviewing the relevance of each 102‑12 OG9 Prioritization and Contribution goal to our business, prioritizing the following five SDGs: The Company’s contribution to the priority UN Sustainable Development Goals
Goal 3: Good Health and Well-Being; UN SDGs UN SDGs targets NOVATEK’s performance 2020 highlights NOVATEK shares the global ambition to achieve the 17 UN targets SDGs by 2030 and, as part of the business community – a Goal 4: Quality Education; 3.8. Achieve universal Provide voluntary medical In 2020, the Company spent RR 236.4 mln on voluntary key potential contributor to the SDGs, we are committed health coverage, including insurance for employees medical insurance programs for employees. to aligning and stepping up our sustainability efforts Goal 7: Affordable and Clean Energy; Good financial risk protection, accordingly. Health and access to quality essential Assist severely ill children 1,590 children benefited from the Company’s charity Goal 8: Decent Work and Economic Growth; and Well-being healthcare services and in desperate need and program in 2020, including: Our 2020 highlights included a significant effort to access to safe, effective, children with disabilities prioritize the UN SDGs, select the SDG targets relevant Goal 13: Climate Action. quality and affordable in the regions where we • 457 severely ill children through the “Health Territory” to our business, and set our own performance targets to essential medicines and operate in meeting their project in 2020; maximize our total impact by 2030. NOVATEK has already been making a significant vaccines for all healthcare needs • 626 telemedicine consultations for children in contribution towards these five SDGs, and will continue to desperate need through the “Telemedicine Center” In 2019, NOVATEK established a Working Group, involving consistently focus on the priority goals using all available project, which brought telemedicine equipment to all functional departments, to define our own sustainable resources. hospitals in Novy Urengoy, Tarko-Sale, Murmansk and development strategy, including a roadmap to achieve Kostroma and connected these facilities to a unified the UN SDGs by 2030. This Working Group identified the We have also identified the targets within the SDGs telemedicine network in 2020; and list of SDGs where the Company has the biggest impact, that are most relevant to our business to make sure our • 120 children through the “Targeted Therapy” project. both positive and negative, throughout our value chain. strategic goals are fully aligned with the priority SDGs. We considered the results of a materiality analysis 3.9. By 2030, substantially By 2030, reduce air In 2020, NOVATEK’s waste generation stood at 47.2 mt (feedback from a stakeholder survey) conducted for our reduce the number of pollutant emissions per compared with 79.6 mt in 2019, representing a decline deaths and illnesses from unit of production by 20% of 41%. hazardous chemicals and air, water and soil pollution By 2030, increase the NOVATEK's NOVATEK's and contamination share of waste directed priority SDGs relevant SDGs to utilization and disposal Good Health Responsible Consumption to 90% No Poverty and Well-being and Production 4.1. By 2030, ensure that Support educational In 2020, NOVATEK spent RR 43.7 mln on various all girls and boys complete institutions and run youth educational programs, such as Gifted Children, Quality Clean Water Life Below Quality free, equitable and quality educational programs Grants for Schoolchildren, Grants for Teachers, and Education and Sanitation Water Education primary and secondary in NOVATEK’s regions of NOVATEK-University. education leading to operation Affordable Industry, Innovation Life relevant and effective Since 2020, together with the Government of the and Clean Energy and Infrastructure on land learning outcomes Provide employeesReporting StandardsYamal-Nenets Autonomous Region, NOVATEK has been with quality education supporting Teacher for Russia, a unique program to 4.3. By 2030, ensure equal matching their jobs bring graduates of Russia’s leading universities to small Decent Work Reduced Partnerships access for all women to help them be more regional schools and provide teacher training for young and Economic Growth Inequalities for the Goals and men to affordable effective in their roles talent. and quality technical, Climate Sustainable Cities vocational and tertiary The Company offers the indigenous peoples of the Far NOVATEK's Sustainability Report is prepared in accordance with GRI Sustainability Reporting Standards, Action and Communities education, including North training programs matched to the employment the Oil &university Gas – Exploration & Production industry Sustainabilityneeds Accounting of energy Standard companies published and the Yamalby the District Sustainability Accounting Standards Board (SASB), as well ascommunity, aligned with as the well recommendations as supports young talentof the among the Task Force on Climate-Related Financial Disclosures (TCFD). local indigenous peoples of the Far North.
Increasing positive impact NOVATEK has contributed to a number of curriculum SASB Oil & Gas Exploration and Production TCFDareas Core within Elements the Cryogenic Technology and Equipment Disclosure Topics for Gas Industry, a master’s degree program offered • Governanceby the Gubkin Russian State University of Oil and Gas Construction Exploration Liquefaction Marketing and final Transportation Transshipment • GHG Emissions • Strategyand assigns its experts with hands-on experience to and Production and Processing consumption • Air Quality • Riskteach Management advanced courses and run workshops under this • Water Management • Metricsprogram. and Targets • Biodiversity Impacts • Human Rights and Communities Relations In 2020, NOVATEK spent RR 51 mln on employee training • Employee and Contractor Health and Safety programs, with 7,500 employees taking part in these • Business Model Resilience training initiatives. • Business Ethics • Risk Management
Minimizing negative impact
30 31 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
UN SDGs UN SDGs targets NOVATEK’s performance 2020 highlights UN SDGs UN SDGs targets NOVATEK’s performance 2020 highlights targets targets
7.1. By 2030, ensure By 2030, increase At the end of 2020, commissioning activities were in • Construction of modern playgrounds; purchase of universal access to LNG production from progress for a 0.9 mmtpa Train 4 at the large-scale waste incinerators, solar panels and mobile solar Affordable affordable, reliable and Company’s projects up Yamal LNG project. power plants; and and Clean modern energy services to 70 mmtpa • Adaptation of residential space and public Energy Our second large-scale LNG project, Arctic LNG 2, property in apartment blocks to meet the needs of Expand the use of involves building three LNG trains with a total capacity people with reduced mobility in the Yamal-Nenets renewables at gas and of 19.8 mmtpa of LNG, with Train 1 expected to come Autonomous Region. condensate production onstream in 2023. 8.5. By 2030, achieve Provide decent work and Our collective bargaining agreement set the minimum facilities full and productive equal pay for the work of monthly pay for our employees above the local minimum The launch of our 40 mtpa small-scale LNG plant in employment and decent equal value wages. As at the end of 2020, the minimum employee By 2025, install LNG fueling Magnitogorsk, Chelyabinsk Region, in 2020 became work for all women and pay in the Yamal-Nenets Autonomous Region was 75% stations along European one of the highlights for the Russian fuel market and men, including for young higher than the local minimum wage, while in Moscow Russia’s main traffic marked another milestone in replacing diesel fuel with people and persons with it was more than twice as high as the local minimum arteries natural gas vehicle fuel, a more environmentally friendly disabilities, and equal pay wage. and economical alternative. This new LNG project will for work of equal value By 2025, supply LNG help Chelyabinsk and Magnitogorsk, two major cities in to consumers in areas the Southern Ural, meet vehicle emission targets in their 8.8. Protect labor rights Deliver a 5% reduction Our LTIFR in the reporting year was 0.49, down 29% year- remote from existing gas effort under the Clean Air emission-reduction project and promote safe in LTIFR1 among our on-year compared with 0.69 in 2019. transmission infrastructure run within the Ecology national project. and secure working employees every year environments for all In 2020, the Company conducted safety awareness Provide consumers with By using a total of 148 renewable energy systems in workers, including migrant initiatives and kept employees informed about all reliable supplies of natural 2020, we cut our indirect GHG emissions from electricity workers, in particular accidents across the NOVATEK Group. gas, and ramp up the generation. women migrants, and production of hydrogen, those in precarious To improve emergency preparedness and ensure early methane-hydrogen NOVATEK had a total of 11 LNG retail stations built at employment provision of first aid, NOVATEK developed emergency mixtures, ammonia and year-end 2020 across Russia’s Ural, Northwestern, medical response plans for remote sites operated other low-carbon fuels Central and Volga Federal Districts (of which 9 were by our subsidiaries, joint ventures, and contractors. produced from natural gas built over the reporting year). These plans cover first aid and follow-up care, early evacuation, and regular first-aid response drills. 7.3. By 2030, double the By 2025, use energy- In 2020, an energy-efficient 40 mtpa small-scale LNG global rate of improvement efficient LNG production plant came onstream in Magnitogorsk, Chelyabinsk 13.1. Strengthen resilience By 2030, reduce methane In 2020, NOVATEK pushed APG utilization to 96.2%, a in energy efficiency technologies to increase Region. The operation is an energy-efficient technology: and adaptive capacity to emissions per unit significant year-on-year improvement. the availability of LNG and using pressure-reduction energy at the city gate to Climate climate-related hazards of production in the reduce greenhouse gas cool methane, this plant liquefies gas without energy Action and natural disasters in all production, processing, and Compared with 2019, our specific GHG emissions were emissions input for the process, limiting the use of gas and countries LNG segments by 4% down 31% in production, 9% in processing, and 8% in electricity to its auxiliaries and infrastructure. LNG liquefaction. Continuously improve By 2030, reduce GHG the energy efficiency of The construction of similar pressure-reduction liquefiers emissions per unit of Deep reinjection of associated petroleum gas to hydrocarbon production will be our priority in 2021. production in the upstream enhance oil recovery from the Yarudeyskoye field cut
and processing segment by 6% our GHG emissions by 1.2 mmt of CO2 equivalent – By saving 8.4 mln kWh (0.3% of NOVATEK’s total a major environmental benefit achieved through electricity consumption) through our energy-saving By 2030, reduce GHG reinjection of over 357 mmcm in 2020. and energy-efficiency initiatives, we reduced our total emissions per ton of LNG energy consumption by 30,500 GJ in 2020. produced by 5% In 2020, NOVATEK joined the Methane Guiding Principles, one of the most important global oil and gas initiatives 8.1. Sustain per capita Contribute to the In 2020, NOVATEK spent RR 4.1 bln to charity projects, By 2030, increase APG towards climate neutrality and low-carbon economy. economic growth in economic and social cultural and educational programs, and support of the utilization rate to 99% Decent accordance with national development of the indigenous peoples of the Far North. Work and circumstances and, in regions of operations By 2025, cut methane Economic particular, at least 7% through new jobs creation, In 2020, the Company financially supported the emissions from operations Growth gross domestic product better infrastructure, following infrastructure initiatives across the Yamal- of LNG fueling stations by growth per annum in the and programs aimed at Nenets Autonomous Region: 20% least developed countries improving living standards for local communities • Repairs and improvements to social infrastructure Reduce the carbon facilities, sports institutions, and pre-school footprint of our products educational institutions; sold internationally • Repair of the sewage pumping station facilities in Tarko-Sale;
1. Lost Time Injury Frequency Rate is calculated as number of lost time injuries × 1 mln person-hours/total hours worked.
32 33 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
102‑12 OG9 UN SDG 2020 highlights The Company’s contribution to the relevant UN Sustainable Development Goals NOVATEK annually enters into cooperation agreements with the regional governments across its operational UN SDG 2020 highlights footprint.
NOVATEK is bringing a significant number of jobs to the regions where we operate. In 2020, as in the previous Sustainable NOVATEK promotes social and economic sustainability and develops the regions of operation through social years, NOVATEK employees’ minimum pay in its core region of operation (the Yamal-Nenets Autonomous Cities and investments and various charity and sports programs. No Poverty Region) was significantly higher than the local minimum wage. Communities
NOVATEK supports the indigenous peoples of the Far North in preserving their culture, values and traditions We have been supporting people in need, veterans, children with disabilities and employees in straitened and their way of life. circumstances across our footprint.
Details are available in: NOVATEK supports the indigenous peoples of the Far North consistent with our Plan to Promote the • the Social Investments section on p. 118. Sustainable Development of Indigenous Peoples within the Yamal LNG Project, a project aimed at improving the quality of life for the indigenous communities. In 2020, as part of NOVATEK’s Environmental and Climate Change targets for the period up to 2030 the Company approved the target to increase the share of waste directed to utilization and disposal to 90% to NOVATEK continued giving its employees special-purpose short-term loans. Responsible 2030. Consumption Details are available in: and Production The Company is committed to sustainable water use and efficient wastewater treatment.
• the Employment Practices section on p. 126, and The Company devotes considerable efforts to ensure sustainable use of natural resources and promotes a • the Social Investments section on p. 118. responsible attitude among its employees and partners, including:
In 2020, NOVATEK committed RR 11.5 mln to repair the Tarko-Sale sewage pumping station facilities. • constant environmental monitoring and operational control;
• effective pollution and waste management aimed at gradual reduction; Details are available in: Clean Water • energy-saving measures, both administrative and technical; and and Sanitation • employee and contractor training on environmental protection and safety. • the Social Investments section on p. 118.
The Company constructs technologically innovative LNG projects in the Arctic Circle. The unique Arc7 ice- We have an ever-growing separate waste collection and disposal system deployed across operations. class LNG tankers were custom designed for Yamal LNG, our flagship project, to support year-round Leveraging this system, NOVATEK-Yurkharovneftegas, for instance, benefits from selling its waste after westbound transits across the Northern Sea Route (NSR) without any icebreaker escort, as well as separate collection. Waste sold in 2020 included waste oils, used batteries, plastic containers, paper and Industry, eastbound transits escorted by icebreakers during the months of difficult ice conditions. cardboard waste, ferrous scrap, pipe and spent catalysts. In 2020, NOVATEK extended the existing separate Innovation and waste collection system rolled out across our operations to several more subsidiaries. Infrastructure NOVATEK is driving innovations towards reducing waste in technical operations, improving equipment reliability, digitization, and reducing carbon emissions and overall environmental footprint. These innovations Details are available in: include: • the Environmental Performance and Protection section on p. 90.
Integrated monitoring of marine ecosystems in 2020 covered the waters and coastal zones of the Kara Sea • implementing unmanned technologies; (Ob Bay), the Barents Sea (Kola Bay, Kildin Strait) and the Baltic Sea (Luga Bay, Vyborg Bay). • using self-contained zero-emission power sources on remote pads with multiple gas wells; Life Below Water • using gravity-based structures to accommodate LNG liquefaction facilities for the Arctic LNG 2 project; In 2020, the Company conducted artificial reproduction of aquatic biological resources by releasing fish into • designing a 450-ton environmentally friendly drilling rig to minimize the environmental impact from drilling important fishing water bodies. We released a total of 3 mln juvenile fish1 of Siberian sturgeon, salmon and under prospective projects and to reduce the carbon footprint; and whitefishes (including muksun) into the rivers of the West-Siberian and Northern fishery basins to replenish • using cogeneration (waste heat recovery). the stocks of these commercially important fish species.
Details are available in: Details are available in: • the Environmental Performance and Protection section on p. 90. • the Environmental Performance and Protection section on p. 90, and • the About the Company section on p. 8. In 2020, NOVATEK reforested about 120 ha (mainly, sparsely stocked and burnt areas) in the Tarko-Sale forest district for the first time. In 2021, we will significantly expand the reforestation geography. NOVATEK also supports human rights initiatives and pursues a policy aimed to foster strong relationships with local communities. Life On Land For the purpose of preserving the genotypes of rare and endangered plant species listed in the Red Data Reduced Books of the Russian Federation and the Murmansk Region, specimens of Rhodiola rosea and Alchemilla We run educational, cultural, sports and social projects for the benefit of local communities and our Inequalities alpina were manually transplanted from the LNG transshipment terminal site on the Barents coast to a employees. greenhouse in the botanical garden at the Kola Science Centre of the Russian Academy of Sciences.
Details are available in: Throughout 2020, NOVATEK supported projects aimed at preserving and increasing rare animal populations: • the Employment Practices section on p. 126, Siberian tiger and Amur leopard. • the Social Investments section on p. 118, and • the Business Ethics section on p. 50. Details are available in: • the Environmental Performance and Protection section on p. 90.
1. The calculation is based on 100% Company’s share in joint ventures.
34 35 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
UN SDG 2020 highlights
NOVATEK actively interacts with partners to achieve sustainable development goals in various areas of our activities and to benefit local communities. Partnerships For The Goals NOVATEK annually enters into cooperation agreements with local governments across its footprint and invests in projects that contribute to social and economic well-being within the regions.
We always hold public consultations when planning projects with potential environmental impact. Details on the planned public consultations and their results are shared through national and regional media.
The Company signed partnership agreements on climate mitigation and energy efficiency with Siemens Energy, Uniper, Nuovo Pignone (a Baker Hughes subsidiary) and NLMK Group.
Details are available in: • the Stakeholder Engagement section on p. 38, and • the Social Investments section on p. 118.
The COVID-19 Pandemic’s Impact countries have continued to shift from coal to natural on Strategy gas as part of the Energy Transition. Most analysts believe that natural gas will play a vital role towards an environmentally sustainable future, with LNG as a key The spread of COVID-19 in 2020 caused significant driver in future global gas demand growth. economic disruption across global financial and commodity markets. The pandemic has profoundly Despite a lower demand for oil and natural gas in 2020, affected the lives of millions of people and changed the LNG market was the only global commodity market to the ways the Company engages with society. During show growth for the year, which once again indicates its this period of uncertainty and volatility caused by resilience to external headwinds and significant growth the pandemic and subsequent economic restrictions, potential. NOVATEK’s top priority remained unchanged – to protect the health and safety of our employees and their families, Recent market research updates suggest no pandemic- as well as contractor employees. Within these efforts, the induced structural changes to long-term LNG demand Company also focused on supporting local communities forecasts. NOVATEK strategic goal remains unchanged – across our footprint through socially important activities1. to increase LNG production and deliveries to the global NOVATEK worked closely with federal, regional and local market up to 70 mmtpa by 2030. authorities, as well as partners to contain the spread of the virus, and took appropriate action, where necessary, Importantly, the COVID-19 pandemic has not had to minimize possible operational disruptions and ensure any impact on global decarbonization ambitions of business stability. governments and businesses and even accelerated the energy transition, as well as adoption of zero-carbon In 2020, the Company met all its operational targets technologies in certain industries. NOVATEK has also for the year, despite the impact of lockdowns and the reiterated its priority focus on climate change mitigation speed of the virus spread. The Company has taken the action and other environmental protection targets. necessary preventive measures to reduce or eliminate the pandemic’s impact on work schedules. For example, At the same time, the COVID-19 pandemic has clearly despite massive delays and cancellations of other global demonstrated the importance of social factors for LNG projects, the Company continued its Arctic LNG business resilience. NOVATEK has prioritized protecting 2 project in 2020: all construction works at the Utrenneye the health of its employees and local communities in field and the Utrenniy LNG terminal were on schedule. the regions of operation, driving productivity and talent retention, improving product and service quality, and During the year, the Company faced extreme volatility enhancing supply chain management. The Company’s in both natural gas and crude oil prices and restrictions nimble responses to the problems and challenges posed across many of its key markets. Importantly, 2020 saw by the pandemic have ensured business continuity and natural gas prices showing signs of gradual recovery after helped to protect our workforce and local communities hitting lows in late spring and early summer. Key importing against the pandemic’s impacts.
1. Details are available in the Social Investments section on p. 118.
36 37 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
NOVATEK’s stakeholder universe is Stakeholder quite diverse given the scale of the Company’s business and its impact on Engagement the economy and social environment in the regions of operation. The Company places a special focus on key stakeholder groups such as shareholders, employees, and local communities.
63 49 24 Key industry and investment Press Releases Public consultations to discuss the conferences results of environmental impact assessments for intended projects
38 39 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Stakeholder Engagement Approach NOVATEK aims to be very responsive to all stakeholder 102‑40 Areas of NOVATEK’s engagement with indigenous peoples: queries. To achieve this, the Company has established 102‑43 a range of communication channels to enable various Stakeholders: • Regular meetings of the Advisory Board for the Yamal In the course of its business, NOVATEK engages with stakeholder groups to communicate their suggestions, LNG Project Development and Implementation; various stakeholders and is committed to building concerns, and queries to NOVATEK1. • Shareholders partnerships and maintaining ongoing dialogues with them • Ongoing consultations with the local communities • Investors for maximum efficiency in addressing the objectives of NOVATEK’s stakeholder universe is quite diverse given based on the free, prior and informed consent received both the Company and society. the scale of the Company’s business and its impact on • Analysts for the Yamal LNG project; the economy and social environment in the regions of 102‑42 operation, as well as on the development of the oil and • Employees • Implementation of the Plan to Promote the Sustainable
The Company engages a fairly wide range of stakeholders. gas sector in Russia and globally. The Company places • Trade unions Development of Indigenous Peoples; and Our key stakeholders were identified based on the a special focus on key stakeholder groups such as Company’s experience, the scale of its business, shareholders, employees, and local communities, as their • Federal and local authorities • Support for non-profit organizations (NGOs of geographic location, the specific nature of the oil and well-being is linked to the Company’s performance and indigenous peoples of the Far North, research • Local communities gas industry and relevant dependencies. The Company sustainability. institutions, sports organizations, veterans’ maintains positive engagement with each stakeholder • Partners associations, etc.). group using the entire mix of available channels. In 2020, due to the COVID-19 pandemic and related restrictions, the • Suppliers and contractors Environmental and social impact assessment, disclosure Company moved much of its stakeholder communications and discussion of its results with stakeholders, and • Customers online while also participating in various external (including obtaining approvals from competent authorities – all industry-specific) online events. • Civil society organizations are key to implementing the Arctic LNG 2 project. An Environmental Impact Assessment (EIA) for the Arctic • Industrial, academic, and research community LNG 2 project was conducted according to the statutory requirements and followed by a review and approval • Media process by Russian authorities between 2017 and 2019. The Engagement Stakeholder purpose of the EIA was to demonstrate that the project formats engagement principles Engagement with local communities met international environmental and social sustainability and HSE standards. • Queries through the Company’s website • Openness and transparency; 102‑43 (www.novatek.ru/en); As part of its regular activities, NOVATEK engages with 413‑1 • Respect for human rights, non-discrimination; stakeholders during the planning and construction of new The Company’s project activities that require • Queries through the Security Hotline and the Ethics and facility projects, with local communities identified as a key environmental impact assessment and state Human Rights channel, handled 24/7; • Readiness to dialogue; stakeholder group. environmental reviews according to Russian laws are accompanied by public consultations which are used • Direct contacts with local communities through • Considering the interests of all stakeholders; The Company takes care to ensure that all stakeholders as a key stakeholder engagement tool, above all for subsidiaries’ channels (by phone and in person through are given the opportunity to communicate questions, local communities living within the project area and a Company representative); • Responding to all stakeholder concerns; and complaints, suggestions and comments during both the local authorities. Apart from environmental impact construction and operation of its projects. Information on assessments, social impact assessments were also • Public consultations and meetings with local • Business ethics, zero tolerance for corruption. the procedure for submitting and handing queries from conducted in accordance with international standards. communities, including indigenous peoples of the Far stakeholders is posted on the websites of subsidiaries The results of these assessments suggest that North; and joint ventures implementing projects and is also made NOVATEK’s projects do not lead to higher unemployment available to local authorities. or homelessness rates, or undermine food security, • Working meetings with employees, including together increase mortality and incidence rates, lead to loss of with trade unions; The Company provides stakeholders with information on access to collective property and services, or result in the activities planned in areas where indigenous peoples social disengagement of local communities or other acute • Annual and sustainability reports, press releases, of the Far North traditionally live and earn their livelihoods. social issues. presentations and other information materials, social To consider the needs of local communities, the Company media; organizes and holds public consultations on economic In addition, the Company regularly provides financing or other activities planned under its projects within the for activities under the Public Program of Indigenous • Conferences, round tables, joint working groups, panels; areas of relevant municipalities. Peoples of the Far North in the Yamal-Nenets Autonomous Region, initiated by the Yamal-Nenets Autonomous • Conference calls, telephone conversations; The Company annually approves with stakeholders a list Region Governor based on the suggestions from local of activities to promote the economic development of communities. NOVATEK also regularly provides financial • Conducting and participating in surveys; communities. support for events held by district and regional civil society groups protecting the rights and interests of • Media events; As part of the Yamal LNG project, we have developed indigenous peoples of the Far North. and continuously update the Stakeholder Engagement • Site visits for investors and journalists; and Plan (last updated in December 2020) identifying key Together with representatives of the Yamal District stakeholders, standards and methods of stakeholder Grassroots Movement of the Indigenous Peoples • Letters and emails in response to queries. engagement, and potential impacts during project of the Far North and district authorities, NOVATEK implementation, describing engagement activities establishes advisory councils for regular consultations undertaken, and containing information on the grievance and development of joint decisions by stakeholders 1. A complete list of contacts is available in the Social Media and Contact Details section on p. 179. and feedback mechanism. on environmental protection, healthcare, culture,
40 41 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
preservation of ancestral lands, protection and support Local communities have access to grievance mechanisms, Channels Frequency Key events in 2020 Focus areas for the traditional ways of life, economy and crafts of with their complaints properly handled by the Company. indigenous peoples of the Far North, as well as on other The formal grievance mechanisms for local communities Annual and sustainability Annually Annual Report 2019 and Sustainability Report 2019 The Company’s issues. are described in the Yamal LNG Project Stakeholder reports published competitive position Feedback Procedure. All queries are reviewed regardless Inclusion in leading All year To mitigate its potential impact, NOVATEK also takes of their nature. In 2020, all queries from indigenous Participation in 23 key industry conferences and 40 Company and industry sustainability rankings for preventive measures, in particular the Company installs peoples of the Far North were requests for assistance investment conferences outlook investors reindeer crossings to maintain the migration routes of and support, with no human right violations or any other More than 200 one-on-one meetings in person and via Sustainable nomadic indigenous peoples and builds winter roads for grievances reported. One-on-one and group All year phone, as well as meetings at industry and investment development snowmobiles and sleds, and other transport. meetings, conference calls, conferences, forums and exhibitions at various financial OG10 OG12 413-2 presentations centers across the globe Human rights of indigenous peoples of the Far North In 2020, there was no significant negative impact from Investor requests Ad hoc are discussed during advisory council meetings, public NOVATEK operations on the local communities. No Investor and analyst queries replied to; public information, consultations and visits to nomadic families’ camping conflicts with local communities including the indigenous including for S&P Global Corporate Sustainability grounds within the South-Tambeyskoye license area. communities, and no activities that resulted in involuntary Participation in CDP and CDP Annually Assessment, FTSE Russell, Sustainalytics, MSCI ESG Water Disclosure Information about these consultations, advisory support, resettlement were reported in 2020. Ratings, Institutional Shareholder Services, Engagement meetings and their results is included in stakeholder International, Vigeo Eiris, and Transition Pathway Initiative Site visits Ad hoc engagement plans as well as in the Company’s corporate indices and rankings, prepared and disclosed social responsibility reports.
Information updates on the All year Carbon Disclosure Project (CDP) and CDP Water Disclosure corporate website questionnaires completed
Stakeholder Engagement in 2020 Participation in conferences All year Online participation in various industry events and summits (conferences, exhibitions, forums): Baker Hughes Energy 102‑44 Summit 2020 in Florence (Italy), European Gas Conference 2020 in Vienna (Austria), Annual Credit Suisse Energy Channels Frequency Key events in 2020 Focus areas Summit 2020 in Vail (USA), International Petroleum Week 2020 in London (UK), CERAWeek 2020, Flame Conference 2020, WoodMac Energy Summit, CEE Small-Scale LNG SHAREHOLDERS Forum 2020, Gastech Summit 2020, World LNG Summit, 6th China LNG & Gas Summit, and Sakhalin Oil & Gas 2020, Shareholder meetings At least Annual General Meeting of Shareholders held on 24 Profit distribution, to name a few once a year April 2020 dividend payout
Press releases and material All year EMPLOYEES (including family members and retired employees) Extraordinary General Meeting of Shareholders held on Appointment and fact notifications 30 September 2020 remuneration of the Shareholder queries (via phone All year Board of Directors and In-person meetings between All year Publication of a corporate newspaper and magazine Operations of the and mail) Shareholder queries replied to; public information Revision Commission management and employees NOVATEK Group prepared and disclosed Tours, including online, organized for employees and Financial disclosures Quarterly, Corporate social programs All year Approval of the their family members to visit partner museums, along Cultural training in key annually Company’s external Collective bargaining All year with visits to attend theater performances and art movements of the th st Annual and sustainability Annually auditor agreement classical music concerts 20 and 21 centuries reports Corporate media All year Approval of the annual Corporate clubs for acrobatic rock’n’roll continued Promotion of a healthy Corporate Secretary All year report and annual Educational and advanced All year their activities lifestyle and sports financial statements training programs among employees and (in accordance with Futsal trainings at the Luzhniki Stadium organized for their families Steps in Discovering Talents All year Information updates on the All year the Russian Accounting employees program for young specialists corporate website Standards) Climate change and Developing and improving All year Employees had the opportunity to participate in online the Company’s efforts the Corporate Technical events of the Student Basketball Association to manage climate INVESTORS AND ANALYSTS Competency Assessment risks and environmental System program for various Employees were able to attend matches of the protection Press releases and material All year Financial disclosures and conference calls held quarterly The Company’s lines of business Russian National Football Team and Russian Cup fact notifications and annually development strategy matches Sustainability reports Annually
Financial disclosures and Quarterly, 49 press releases published The Company’s Security Hotline 24/7 conference calls annually operating and financial Cultural and sports events All year performance
42 43 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Channels Frequency Key events in 2020 Focus areas Channels Frequency Key events in 2020 Focus areas
Participation in the activities of the working group Protecting the rights of TRADE UNIONS on enhancing regulation for responsible forest indigenous peoples of management, as well as forest preservation, the Far North prosperity and care at the Federal Forestry Agency Discussion and signing of Once every Participation of the Company’s management in four Performance under the Biodiversity matters the collective bargaining three years trade unions meetings collective bargaining Participation in the events organized by the Russian agreement agreement Union of Industrialists and Entrepreneurs Subsoil resource development in forests, Discussion and signing of Ad hoc Occupational health Participation in the activities of the Committee on reforestation and addenda to the collective and safety Environment and Nature Management at the Chamber afforestation matters bargaining agreement of Commerce and Industry of the Russian Federation Developing initiatives Participation of the All year Protection of Participation in the working groups of the Ministry related to supporting Company’s management in employees’ rights and of Natural Resources and Environment of the Russian manufacturers the meetings of trade union interests Russian Federation on entrepreneurship, biodiversity and equipment committees conservation, and pressing forest management localization Attendance of trade All year matters union conferences by the Developing criteria for Company’s management Participation in meetings of the working groups classifying products as on energy, environment and nature management, manufactured in Russia Participation in joint All year occupational, fire, sanitary and epidemiological occupational health and safety, forestry, land use, real estate, and water Developing proposals safety committees transport to apply the “regulatory guillotine” concept to improve the rules Joint efforts as regards All year and mechanisms for Participation in meetings held by the Russian Ministry recreational, sports and granting R&D subsidies of Energy, Industry and Trade, Ministry of Economic cultural events Development, Ministry of Natural Resources and Developing initiatives Sustainability reports Annually Environment, Ministry of Transport, Federal Agency related to supporting for Maritime and River Transport, and other relevant Russian manufacturers federal authorities GOVERNMENT AUTHORITIES and equipment localization Proposals prepared for amending regulations Federal governing the classification of products as manufactured in Russia and establishing the rules for Contribution to law-making All year Interaction with the State Duma and the Federation Fuel and energy sector the allocation of state subsidies for R&D related to Council of the Federal Assembly of Russia, which development in the Participation in working All year modern technologies includes taking part in commission, committee, current and future groups, joint meetings, working group and expert council meetings, and other conditions round-table discussions, Proposals prepared for making a list of advanced activities technologies to be selected as eligible to receive a conferences, and forums Developing the Arctic subsidy to cover a part of R&D costs Participation in the working group responsible for transport system the action plan to form a common gas market in the Proposals prepared for a list of priority standards for Eurasian Economic Union Energy efficiency and energy development the implementation of LNG projects planned to be Participation in the activities of the Marine Board developed under the Government of the Russian Federation Eliminating administrative barriers Participation in meetings held by the Ministry of Participation in the activities of the Russian–Asian in the subsoil and Industry and Trade and the Ministry of Energy Pacific and Russian–European intergovernmental natural resource use commissions on energy, economic, industry, and R&D Participation in the Arctic: Today and the Future cooperation Air emissions reduction international forum
Participation in the activities of a working group Occupational safety Local on the removal of administrative barriers at the Replacement of mineral Interactions under All year Engagement with local authorities on engaging Economic development Government Commission on the Use of Natural resources cooperation agreements industrial enterprises in project implementation of the regions Resources and Environmental Protection on the social and economic Implementing the Participation in the activities of the interdepartmental development of local Implementation of social and economic programs Improving living Concept of Forming a working group on reducing the dependence of communities pursuant to agreements with the governments of standards; educational Common Gas Market in the Yamal-Nenets and Khanty-Mansiysk Autonomous programs the Russian fuel and energy sector on imported Participation in meetings, All year the Eurasian Economic Regions, as well as municipalities in the Yamal- equipment, spare parts, accessories, and software, round-table discussions, Union Nenets Autonomous Region, the administrations of Improving utility as well as services of foreign providers, and developing conferences, forums, etc. the Russian oil and gas industry the Chelyabinsk, Kostroma, Leningrad, Murmansk infrastructure and and Tyumen Regions, and the Government of the upgrading social Kamchatka Territory infrastructure facilities
44 45 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Channels Frequency Key events in 2020 Focus areas Channels Frequency Key events in 2020 Focus areas
Disclosure of information on All year Implementation of social and economic programs Protecting the rights of the Company’s activities in pursuant to agreements with the governments of indigenous peoples of PARTNERS UNDER JOINT INITIATIVES local media the Yamal-Nenets and Khanty-Mansiysk Autonomous the Far North Regions, as well as municipalities in the Yamal- Cooperation agreements All year Effective interaction under joint initiatives and Joint initiatives Nenets Autonomous Region, the administrations of Engagement of local cooperation agreements the Chelyabinsk, Kostroma, Leningrad, Murmansk manufacturers in the Joint initiatives All year Prospects and areas and Tyumen Regions, and the Government of the Company’s current and A number of executive meetings between companies for cooperation Kamchatka Territory perspective projects Shareholder meetings All year Management meetings All year Participation in exhibitions and conferences: Tyumen Import substitution and Participating in meetings and implementing Implementation of Oil and Gas Forum, the Ministry of Defense Extended local manufacturing of projects related to the organization of sanitary perspective LNG Working group meetings All year Board for the Boiler House Conversion to LNG, equipment in Russia and epidemiological activities, as well as fitting and projects Security Hotline 24/7 Arctic: Today and the Future international forum, equipping PCR laboratories and transferring PPE to International LNG Producer-Consumer Conference in healthcare facilities in the Chelyabinsk, Kostroma and Improving sports Briefings Ad hoc Japan, and the 13th Eurasian Economic Forum in Verona Murmansk Regions, Yamal-Nenets Autonomous Region, infrastructure and Participation in exhibitions and All year and the Kamchatka Territory social infrastructure conferences facilities Exchange of information with the governments of the Murmansk Region, Yamal-Nenets Autonomous Region SUPPLIERS AND CONTRACTORS and the Kamchatka Territory
Supplier selection process All year, Meetings with manufacturers of oil and gas Discussions with key LOCAL COMMUNITIES using an equipment and materials market participants on electronic the following: bidding Qualification assessments for Russian and Cooperation agreements All year Targeted programs and disbursements to indigenous Financing the repairs of platform (as international manufacturers to participate in • The needs for on social and economic peoples of the Far North (as provided for by the utility infrastructure needed) the NOVATEK’s project process equipment, development of local Agreement with the Government of the Yamal-Nenets pipe products and communities Autonomous Region) Preserving the national Participation in trade shows, All year Tenders on the electronic bidding platform for steelwork for the identity of peoples of forums, and other events Interaction with associations All year selecting the NOVATEK suppliers NOVATEK’s projects, Financial support provided to the Yamal for the Far North of indigenous peoples of the Responding to queries All year as including LNG; Descendants Association of Indigenous Peoples in Far North received via the website (Sales per requests Sharing of experience with the largest Russian • Possible ways the Yamal-Nenets Autonomous Region and its district Supporting low-income and Tenders page) and international manufacturers and engineering to improve the branches groups Targeted support to people in Ad hoc companies competitiveness of Qualification procedures for All year need Russian enterprises; Financing the purchases of snowmobiles, gas-fired Social programs suppliers (including facility Signing of strategic agreements with key partners Letters to public authorities Ad hoc and boilers, equipment and materials required to support audits) aimed at improving • Creating favorable Public consultations Ad hoc fishermen and reindeer herders Supplying oils and the quality of life Security Hotline 24/7 conditions for lubricants for air delivery of the nomadic population, for the indigenous Advisory board in the Yamal Ad hoc import substitution food and fuel to remote areas communities District and local manufacturing of Round tables in the Purovsky Three to Purchasing medical devices for people with disabilities, Interaction of industrial equipment in Russia and Tazovsky Districts four times financing of treatment, providing assistance to people enterprises with a year in financial distress indigenous peoples CUSTOMERS Disclosure of information on All year Due to COVID-19 restrictions, one meeting was held to Employment in the the Company’s activities in discuss the activities implemented last year regions of operation local media Telephone inquiry service Daily Receipt and distribution of phone calls to NOVATEK’s Production and (business Help Desk number specified on the corporate website: supply of gas, liquid Press tours and site visits for journalists, interviews Helping children in Population surveys Ad hoc days) handling incoming calls, forwarding calls to respective hydrocarbons and LNG with Company employees, presentation of social desperate need business units as well as subsidiaries and joint (in Russia and abroad), Sustainability reports Annually programs Customer Account service on 24/7 ventures pricing the website Security Hotline 24/7 Legal status of Preparation and publication of interviews with indigenous peoples of Contact Information All year Meeting visitors to the Company’s head office Company managers and specialists the Far North Security Hotline 24/7 Enhancing administrative support to facilitate Participation in the Arctic: Today and the Future business networking during official negotiations and Counterparty Account service 24/7 international forum meetings for business customers on the website
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Channels Frequency Key events in 2020 Focus areas Channels Frequency Key events in 2020 Focus areas
Meetings on payment All year Providing brief information on NOVATEK’s profile discipline during the Company’s participation in major forums MEDIA and conferences (meeting visitors at the Company’s Publication of information in All year stand) the media Press releases All year Conducted 13 events for the media with the Strengthening the Responding to questions on technical support of participation of the Company’s speakers, including Company’s position in Mobile application All year Press tours All year services and suggestions for improving Customer visits for journalists to production facilities and the global LNG market, Account service on the website Interviews with, and comments All year regional operations involved in the implementation of developing existing from, top executives and NOVATEK’s projects LNG projects, engaging Daily interactions with business customers maintained directors new partners, and TV news stories for federal and regional TV channels expanding into new on topics related both to the Company’s operations Publications to inform customers on gas supply terms, Briefings, press conferences All year markets promotion campaigns and events and assistance to healthcare systems in the regions Comments and replies to All year as of operation Media coverage media requests per requests of the Company’s CIVIL SOCIETY ORGANIZATIONS More than 64,000 publications with Company mentions Drafting articles and current activities, All year reported by Russian and foreign media in 2020 information materials for the engagement of Russian Membership and cooperation All year Supporting programs for the rollout and operation Biodiversity and media More than 6,500 publications with Company mentions industrial enterprises of a monitoring system to preserve and protect the biological resources reported by foreign media in 2020 in the implementation Participation in conferences, All year Siberian tiger and the Amur leopard populations conservation of NOVATEK’s LNG forums and other events projects Supporting long-term programs for preserving the Environmental Sustainability reports Annually Comments on pressing Siberian tiger and the Amur leopard populations protection matters concerning the Sustainable development of the development LNG market in Russia and globally Climate change and GHG emissions INDUSTRIAL COMMUNITY, including academic and research community
SOCIETY Participation in conferences, All year Participation in the Tyumen Oil and Gas Forum, Promising projects forums, round-table Extended Board of the Ministry of Defense, being implemented by Interaction with leading sports All year Support for major Russian museums, theaters and Philanthropy and discussions, etc. Arctic: Today and the Future international forum, the Company and cultural institutions creative teams sponsorship efforts International LNG Producer-Consumer Conference in Participation in joint sessions As per Development of the Japan, and the 13th Eurasian Economic Forum in Verona Interaction with non-profit All year Support and implementation of sports projects and Support and requests fuel and energy sector organizations programs on the federal and local level development of cultural and the oil and gas Partnerships As per projects industry in general events Assistance to children in desperate need in the calendar Philanthropic efforts All year regions of the Company’s operation, under NOVATEK’s Promoting sports, Competition charity program aimed at running projects for children organizing and development Volunteer movements All year Cooperation with leading oil All year with severe medical conditions, disabilities, cancer, supporting and gas universities as well as visually impaired children and extremely low competitions for birth weight babies schoolchildren, Participation in industry All year students, and organizations Assistance to children in orphanages, children professional sports suffering from various illnesses, lonely elderly people, teams and disabled people Targeted assistance to ill children, development of healthcare and medical education programs in the regions of the Company’s operation
Promoting new technologies in the Russian healthcare sector
Developing and implementing corporate volunteering programs
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NOVATEK pays special attention to Business Ethics safeguarding the rights and freedoms of the indigenous peoples of the Far North, and cares about preserving their culture and traditional ways of life.
624 0 Reports were received via Grievances on human rights Security Hotline in 2020 violations from indigenous peoples of the Far North
50 51 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Approaches to Business Conduct The Company has a Security Hotline for reporting In 2020, the NOVATEK Group’s security hotlines received any offences, cases of fraud or corruption, 624 reports from citizens and organizations, including: 102‑16 conflicts of interest or other stakeholder concerns: NOVATEK is fully committed to the highest standards of [email protected], +7 (495) 232 39 59. • 356 reports related to issues arising from the ethical business behavior: the Company strictly complies performance of a contract for the supply of natural gas with Russian laws while also striving to apply applicable The Security Hotline contact details are available on for residential customers (clarification of grounds and 2 624 international standards in practice. NOVATEK’s website . Security hotlines are also in place at procedure for gas payment calculation, maintenance subsidiaries and joint ventures, and their contact details Reports were received via of consumer building and apartment gas equipment, The key documents that define the Company’s position are posted on websites, information boards in offices and Security Hotline in 2020 replacement and calibration of gas meters, etc.); on business ethics are the Code of Business Conduct production facilities, and at rotation camps. and Ethics, the Anti-Corruption Policy, the Corporate • 128 reports related to the implementation of measures Governance Code, and the Supplier Code of Conduct. NOVATEK has established a dedicated channel for to combat the spread of COVID-19 at the Group All NOVATEK employees are responsible for compliance reporting violations implying discrimination, harassment facilities; with the business ethics standards laid down in these based on gender, race, nationality or any other grounds, documents. The implementation of these documents bullying, or human rights breaches. Any person may International anti-corruption laws include: • 84 reports related to the operations of gas retail and compliance with generally accepted ethical report any known violations, including violations of the stations and multi-fuel fueling stations (bonus points standards is monitored by various departments within the Code of Business Conduct and Ethics, by e-mail at • United Nations Convention against Corruption; accrual, fueling stations’ working hours, volume of gas Company: HR, Business Support, Legal, Procurement and [email protected]. Designated employees review each tanks refueling, operator/cashier rudeness towards Localization, Investor Relations, and Internal Audit. message. • Criminal Law Convention on Corruption of the Council customers at fueling stations, etc.); and of Europe; and NOVATEK identifies the following areas of ethical conduct The Company guarantees confidentiality and undertakes • 56 reports related to delayed salary payment to as the Company’s priorities: to review all reports and take action if improper or • OECD Convention on Combating Bribery of Foreign employees of contractors and subcontractors, unethical practices are identified. Public Officials in International Business Transactions. challenging the results of tender procedures, fraudulent • respect for human rights in all aspects; acts, etc. The mechanisms adopted to collect reports and The United Kingdom Bribery Act is among foreign anti- • zero tolerance for corruption, and anti-corruption feedback help the Company ensure timely processing corruption laws. 205‑2 efforts; of complaints and resolution of conflicts and, more The Anti-Corruption Policy is available to all stakeholders importantly, attempt to reduce the likelihood of similar The key requirements of the above regulations include: on the Company’s website. Information on the document • safe working conditions; people’s life and health as a incidents recurring in the future. is also disclosed in the Company’s sustainability reports. top priority; • prohibition to offer bribes or commercial bribes; 100% of employees, governance body members and business partners are informed of the Company’s Anti- • responsible attitude to the culture and traditions of • prohibition to bribe foreign public officials; and Corruption Policy. local communities; and Anti-Corruption and Prevention of Conflicts of Interest • prohibition to take bribes or commercial bribes. The person in charge of implementing and overseeing • information security and confidentiality of personal the measures aimed at preventing corruption across data. 205‑2 102‑17 the Company is the Anti-Corruption Adviser, from NOVATEK is rated “A2” (companies with a high level of All employees of NOVATEK receive ongoing training in whom advice may be sought by any employee looking The Company strives to create a business environment commitment to anti-corruption compliance) by the first ethical conduct and zero tolerance approach to illegal for clarifications on the Anti-Corruption Policy or other where business ethics standards are respected by national Anti-Corruption Ranking of Russian Business activities. To this end, the Company has developed and corruption-related matters. To prevent corruption, the all participants in the supply chain and stakeholders 2020 compiled by the Russian Union of Industrialists and implemented an interactive online course “Basics of the Company develops Action Plans to be undertaken to at large. An important step in this direction was the Entrepreneurs. Company’s Anti-Corruption Policy and Anti-Corruption implement the Anti-Corruption Policy. adoption in 2020 of the Supplier Code of Conduct, which Practices for Employees”, which is available on the defines the Company’s expectations from suppliers in NOVATEK strictly abides by the anti-corruption laws of Company’s intranet portal at the starting page and in the During the reporting year, anti-corruption initiatives were terms of business ethics, human rights, labor relations, Russia and other countries in which it operates. The special section for new employees. The employees of the implemented as part of the 2020 Action Plan, including: environmental protection, and health and safety. Group is guided by uniform regulatory requirements for Company subsidiaries and affiliates also have access to managing anti-corruption efforts, imposing and cancelling the course via a single hyperlink. In addition, all employees • monitoring of Russian and foreign anti-corruption laws a trade secret regime, and protecting insider information. may at any time seek advice on compliance with the Anti- and relevant law enforcement practices; Grievance mechanisms The Company’s Anti-Corruption Policy sets out the key Corruption Policy, ethical conduct, confidentiality, and principles that underpin its efforts to counter and prevent other similar matters. • advising Company employees on the practical NOVATEK’s interaction with stakeholders is designed corruption. The document is available on the Company’s application of the provisions of NOVATEK’s Anti- to avoid any violations of human rights. The Company website both in Russian and English. All subsidiaries and All partners of the Company are made aware of Corruption Policy, Regulations on the Conflict-of- acknowledges the need for efficient resolution of such joint ventures of NOVATEK have similar documents in place. NOVATEK’s Anti-Corruption Policy and strict standards of Interest Management at NOVATEK, and on handling issues and to this end has developed and introduced a ethical business practices and undertake to comply with confidential information; and grievance mechanism. A number of channels have been When developing its Anti-Corruption Policy, NOVATEK them, in line with an anti-corruption clause incorporated set up for stakeholders, including local communities, to took into account the requirements of international and into all the Company’s contracts with third parties. • monitoring Company employees’ compliance with the file complaints and requests: by phone, post or e-mail, via foreign regulations, as well as the recommendations of requirements of NOVATEK’s Anti-Corruption Policy. feedback and suggestion boxes1. Russian, foreign and international anti-corruption bodies 102‑17 and agencies. The Company’s Security Hotline is one of the most The results of anti-corruption efforts and the new 2021 important anti-corruption tools that any stakeholder can Action Plan were discussed and approved by the Audit use to report known cases of corruption or any other Committee on 17 December 2020. concerns. 1. Details on grievance mechanisms for local communities are available in the Social Investments section, p. 118. A full list of contact details and ways to file reports is available in the Social Media and Contact Details section on p. 179. 2. A full list of contact details is available at https://www.novatek.ru/en/about/Hotline/.
52 53 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Prevention of conflicts of interest • Universal Declaration of Human Rights; The Company pays special attention to safeguarding the rights and freedoms of the indigenous peoples of 102‑25 • International Labor Organization’s Declaration on the Far North, and cares about preserving their culture NOVATEK places a special emphasis on preventing conflicts Fundamental Principles and Rights at Work; and traditional ways of life. NOVATEK regularly informs of interests to maximize its performance and protect its employees as well as contractor and subcontractor shareholder interests. For effective conflict of interest risk • UN Global Compact; and 0 employees about the norms of behavior within indigenous management, certain employees in key decision-making areas (including cultural heritage sites). capacities are required to disclose conflicts of interest (or • Social Charter of Russian Business. Grievances on human rights their absence) by filling in respective declarations. violations from indigenous NOVATEK considers human rights risks with regard to The Company’s commitment to human rights is reflected supplier engagement. At the same time, the Company NOVATEK managers and employees are expected to in its key corporate documents (Code of Business peoples of the Far North is aware that suppliers can both be exposed to human perform their duties putting corporate interests first and Conduct and Ethics, Anti-Corruption Policy, Supplier Code rights risks and have their own human rights impacts. foremost and separating their personal interests from of Conduct, Health, Safety and Environment Policy, and NOVATEK makes sure that its partners share the decision-making. Collective Bargaining Agreement). Company’s ethical principles: violations of the human rights of employees, local communities and other people Should their personal and corporate interests become NOVATEK uses the following mechanisms to ensure that NOVATEK respects the right and wish of employees to by suppliers are unacceptable. In its interactions with incompatible, NOVATEK managers and employees are human rights are respected: form associations to protect their interests. Moreover, suppliers, NOVATEK is also focused on assessing and obliged to report such a conflict immediately. They are the Company views such associations as an opportunity mitigating the risk of corruption and other forms of unfair also expected to refrain from any forms of competition • the Company is committed to human rights, and to get feedback and maintain a positive dialogue with conduct. The Company’s position regarding ethical and with the Company in business and investment projects. integrates them into internal regulations; employees through in-person meetings, meetings of other norms of conduct expected from suppliers is set Company employees are not allowed to pursue any union committees, and conferences. Open discussions forth in its Supplier Code of Conduct adopted in 2020. property or financial interests in competitor businesses. • the Company engages stakeholders in a dialogue on of disputes and issues strengthen the foundation of the They are advised to refrain from conducting interested- human rights; partnership and help develop the Company’s capabilities. party transactions. The Company also seeks to avoid conflicts of interest caused by giving/receiving gifts, • the Company ensures that its employees and partners NOVATEK is a member of IndustriALL Global Union1 and Information Security services or any other benefits. respect human rights; the CIS International Confederation of Trade Unions of Workers in the Oil and Gas Industries, and Construction NOVATEK takes a systematic approach to information Members of the Board of Directors shall: • the Company safeguards the rights of local Workers in the Oil and Gas Complex through its security, striving to meet the highest standards in this communities including indigenous peoples of the Far membership in the Russian Oil and Gas Construction area. Information security matters are managed by the • promptly give the Chairman of the Board a written North; and Workers’ Union whose activities are aimed at protecting Information Security Department. notification of personal or commercial interests in any professional, social and labor rights and interests of transaction, including those involving the Company • the Company develops feedback channels that enable Union members. In its operations, the Russian Oil and Gas In 2020, NOVATEK developed a number of regulations on securities; and stakeholders to express their views or grievances on Construction Workers’ Union is guided by the principles of information security: related matters (specifically, the Security Hotline). social partnership. • duly disclose their jobs with other companies. • Information Security Policy; In 2020, as part of its risk mapping exercise, the Company To ensure reliable protection of employees from injuries • Members of the Management Board shall: updated its conduct risks to include human rights risks, or other harm, the Company strictly monitors compliance • Regulations on Corporate Information Network Building; making it possible to objectively assess its human rights with occupational health and safety standards and • notify the Management Board of any personal interests impacts and prevent conflict or unethical situations. regulations, offers training and education, further • Corporate Information Network Policy; in transactions to which the Company is or intends to be improves its occupational health system, and provides a party, before such transactions are decided upon; and 408‑1 409‑1 quality healthcare services. • Automated Workstation Roll-Out Procedures; and With regard to labor relations, the Company has identified • set up or manage no business entities competing the following human rights risks: health and safety Risks associated with human rights of local communities • Backup and Recovery Procedures. with NOVATEK, except as permitted by the Board of (injuries, occupational diseases, etc.), discrimination on include aspects such as illegal or forced relocation, Directors. any grounds, the use of forced and child labor, breach disruption of traditional ways of life and cultural These documents were approved and came into effect of collective bargaining agreement and limiting freedom traditions, and environmental damage. The Company in 2021. of association. The Company manages the human rights recognizes its responsibility to local communities and the risks associated with labor relations primarily by ensuring environment in its regions of operation and guarantees The Company makes regular arrangements for the Human Rights full compliance with the Labor Code and other laws of the respect for human rights through various mechanisms following information security measures: Russian Federation, which in itself precludes human rights such as strict compliance with environmental and social Human rights are a key element of NOVATEK’s business violations. NOVATEK does not use child or forced labor. legislation, ongoing dialogue with local communities, and • controlling user access to information, maintaining ethics, gaining in importance in engagement with provision of channels to submit reports and grievances, systems’ physical security; stakeholder groups such as, but not limited to, Company Our HR decisions are based on employee qualifications, which must be addressed at all times. NOVATEK also employees and local communities across the Company’s knowledge and professional skills; when dealing with makes a significant contribution to the economic and • protection of corporate data against malware, use of footprint. The Company strictly complies with Russian employees and any other individuals, the Company does social development of its regions of operation, including internet filtering and anti-spam software; human rights legislation and also embraces principles and not take into account any other personal characteristics infrastructure development, targeted assistance and guidelines set out in the following international human such as race, gender, age, ethnicity, religion, political or support for educational, sports and social projects • management of removable media; rights instruments: other beliefs, social background, etc. across its footprint.
1. IndustriALL Global Union represents 50 mln workers in 140 countries in the mining, energy and manufacturing sectors and is a force in global solidarity taking up the fight for better working conditions and trade union rights around the world.
54 55 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
• corporate network security management; comply with Federal Law No. 152-FZ “On Personal Data” dated 27 July 2006 and are regulated by the Federal • data breach control; Service for Supervision in the Sphere of Telecom, Information Technologies and Mass Communications • procedures for the use of electronic signature (Roskomnadzor), a state regulator. platforms; Personal data security is ensured in accordance with the • protocols for third parties accessing NOVATEK’s following approved documents: Personal Data Processing corporate network; Policy, Regulations on Personal Data Processing, Personal Data Threats Particular Model, Personal Data • handling of information security incidents; Use Technical Policy, and Regulations on Responding to Personal Data Security Breach Incidents. • security requirements for information systems; The Personal Data Processing Policy applies to all personal • control of administrative users in the IT infrastructure; data handled by NOVATEK. The Policy objectives are ensuring compliance with privacy laws, safeguarding • participation in information security IT projects; human rights and freedoms in personal data handling, including the right to respect for one’s privacy and • corporate network policy awareness training for private and family life. The Policy sets out general rules employees; and of personal data handling by the Company and measures to ensure personal data security and the rights of data • secure use and control of mobile computing devices subjects. and remote access. Regulations on Personal Data Processing set out the A separate focus area for the Company is cyber security. guidelines, objectives and procedures for personal data The Information Security Department also implements and handling by the Company, procedures for detecting constantly refines ongoing organizational and technical and preventing violations of personal data laws and measures to guard against cyber threats, including: procedures for relevant corrective actions, internal controls for compliance with personal data laws and the • employee training in internet and e-mail use; Company’s internal regulations.
• installation of systems detecting and preventing Regulations on Responding to Personal Data Security cyberattacks; Breach Incidents aim to protect personal data in corporate information systems from unauthorized access • use of firewall, anti-malware, anti-spam and internet and disclosure. The Regulation establishes the procedure filtering systems; for incident response, logging and resolution and is a binding document that must be followed by all NOVATEK • vulnerability analysis of all information systems employees. accessible from the internet; and The general procedure for responding to personal data • using perimeter network for all information systems security incidents includes: accessible from the internet. • incident logging, including a severity assessment; The Company’s Information Security Policy states that important information security objectives include • incident investigation, including by a specially improving employee awareness (including of cyber established task force performing risk analysis and security) and reduction in information security incidents damage assessment; development and implementation due to employee ignorance and negligence regarding the of organizational and technical measures to resolve the key requirements for handling sensitive data covered by incident; the Company’s local regulations. • preparing an incident investigation report on Working with partners, the Company also requires its investigation findings; and counterparties to comply with information security requirements. When engaging with third parties, the • taking disciplinary action against an employee guilty Company signs a confidentiality agreement and includes of the information security breach and implementing information security clause in external contracts. measures to mitigate risks in the future.
NOVATEK carefully safeguards personal data and complies In 2020, NOVATEK reported no violations in personal data with applicable legislation. The Company’s operations handling.
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In 2020, a woman was Corporate elected to NOVATEK’s Board of Directors for Governance the first time.
13 50 % Board of Directors meetings Minimum target dividend payout level approved by the Board of Directors
58 59 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Corporate Governance System • Regulations on the Board of Directors; Strategic• NOVATEK level Group’s Executive Bodies and Other Key 102‑21 Employees Remuneration and Expense Reimbursement NOVATEK places special emphasis on enabling effective 102‑18 • Regulations on the Management Board; Policy; communication with shareholders and keeping them up NOVATEK has a streamlined corporate governance Reports to to date about the Company’s activities,Risks current of matters Board of Directors Audit Committee structure that enables effective and efficient • Regulations on the Audit Committee of the Board of • Anti-Corruption Policy; and and projects. emergencies management of the Company’s operations. Committed Directors; and incidents to sustainable development, NOVATEK goes beyond • Supplier Code of Conduct. Shareholders and other stakeholders may seek mandatory compliance with Russian laws and internal • Regulations on the Remuneration and Nomination clarification on any matters or request any additional regulations: we adhere to a variety of standards, codes, Committee of the Board of Directors; TacticalThe Company level ensures a high level of corporate information by sending a letter to the attention of the and Russian and international best practices. The governance by adhering to the following principles: Chairman of the Board of Directors and EnvironmentalChairman of the Reports to Reports risks Company strives to consider the principles of corporate • Regulations on the Strategy Committee of the Board of Management Board. For these purposes, the Company’s Performance evaluation governance outlined in the Corporate Governance Code Directors; • equal and fair treatment of all shareholders; official website contains necessary contact details, recommended by the Central Bank of Russia, and to meet Chairman of the Reports to includingInternal a dedicated e-mail address for shareholder the requirements of the UK Corporate Governance Code • Regulations on Dividend Policy; • protectionManagement of shareholders’ Board entitlement to share the Auditqueries: Division [email protected]. and those of the Regulation of the European Parliament Company’s profit in the form of dividends; Conduct risks and of the Council on market abuse. • Regulations on Information Policy; The Chairman of the Management Board and his • accountability of the Board of Directors and executive deputies in charge of various business lines take part Pursuant to NOVATEK’s Articles of Association, the • Corporate Governance Code; Organizationalbodies to shareholdersand operational and level relevant controls; in international forums and conferences providing General Meeting of Shareholders, the Company’s supreme stakeholders with updates on the Company’s activities. governance body, elects members of the Board of • Code of Business Conduct and Ethics; • professionalism and competence of members of the In addition, during the Annual General MeetingsSocial of Risk identification and assessment risks Directors and the Chairman of the Management Board Board of Directors and the executive body, commitment Shareholders attended by members of the Board of (sole executive body). The Board of Directors elects • Regulations on the Corporate Secretary; to the Company’s goals and developmentReports strategy; to Directors and the Management Board, the meeting members of the Management Board (collegial executive Management Board Risk Controlprocedure Division provides for an option to ask questions about body) as proposed by the Chairman of the Management • Internal Audit Policy; • reasonable decision-making in good faith by the Board the Company’s business. Another type of interaction is Board. Local suppliers of Directors and the executive body for the benefit of the Company’s quarterly conference callsOther on its financial risks • Regulations22% on Risk ManagementForeign and Internal suppliers Control the Company and its shareholders; and operational performance. Key internal documents regulating various aspects of System; Business units corporate governance: • transparent and timely disclosure of information; All material events are timely announced to shareholders • Regulations on Remuneration and Compensations and stakeholders on the Company’s official website. • NOVATEK’s Articles of Association; Payable to Members of NOVATEK’s Board of Directors; • commitment to sustainability principles; and
• Regulations on the General Meetings of Shareholders; 78% • anti-corruption. Board of Directors Board of Directors Recommendations on current approves climate change initiatives 102‑26 102‑29 sustainability trends, General Meeting of Shareholders The competence of the Boardincluding of Directors climate includeschange 102‑18 general management of the Company’s operations, Corporate governance structure 102‑18 defining its priority lines of business and development The General Meeting of Shareholders1 is NOVATEK’s strategy, except for matters referred to the General supreme governance body. NOVATEK holds the mandatory Meeting of Shareholders as per the Federal Law On Remuneration and Nomination Committee Annual General Meeting of Shareholders on the date Joint Stock Companies. The Board of Directors has the Supreme governance body Revision with a sustainability function General Meeting of Shareholders Commission set by the Board of Directors, but not earlier than two following remit2: oversees climate change matters on behalf months and not later than six months after the end of the of the Board of Directors reporting year. The Company also convenes Extraordinary • define the Company’s strategy and priority lines of General Meetings of Shareholders in addition to the business; Strategic governance body Board Committees Annual General Meeting. Board of Directors • approve long-term and annual business plans; On 24 April 2020, the Annual General Meeting of Deputy Chairman of the ESG matters Deputy Chairman of the Management Board – Shareholders reviewed the Company’s 2019 performance; • review financial performance, internalManagement controls, Board risk Operations Director Remuneration (Sustainable Strategy Audit approved the Annualin charge Report of the and Integrated annual financialHSE Management Systemmanagement, (IMS) and other matters; and Nomination Committee Committee statements (in accordance with the Russian Accounting development) Committee Chairman of the Standards); distributed profit and determined the size • approve major transactions; Management Board and form of dividends for FY2019; elected the Board Internal of Directors and the Revision Commission; determined • make decisions on investment projects; Audit Division remuneration to members of the Board of Directors Collegial executive body andGas Revision and Condensate Commission; and approvedHSE Department the Company’s • recommendDirector for the dividend per shareInvestor amount Relations and dividend Management Board externalProduction auditor for 2020. (GHG emissions, APG) Alternativepayout procedure; Energy and Department and Processing and Offshore (Sustainable On 30 SeptemberDepartment 2020, the Extraordinary General Meeting • conveneTechnologies the General Meeting of Shareholders.development) Corporate Business Board of Directors of Shareholders(Energy efficiency) approved the amount of interim dividends (Alternative energy) Secretary units for the first half of 2020.
Independent Board 1. Details on the competence of the General Meeting of Shareholders are available in NOVATEK’s Articles of Association, pp. 8–10. of Directors members 2. Details on the competence of the Board of Directors are available in NOVATEK’s Articles of Association, pp. 17–20.
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At least twice a year, the Board of Directors reviews Effective operation of the Board of Directors is • reviewed the progress on NOVATEK’s Corporate and delivered at the reporting meeting of the Board of matters related to the Company’s strategy in all key lines ensured by the Corporate Secretary, who has sufficient Strategy to 2030 as regards market analysis (internal Directors to be considered while preparing an activity plan of business, as well as matters of sustainability and social independence (is appointed and dismissed by resolution and external markets), logistics, risks and their for the next corporate period. performance in the regions where the Company operates. of the Board of Directors) and is endowed with the assessment, and targets; necessary powers and resources to carry out his or During corporate year 2020, a self evaluation of the 102‑23 102‑24 her tasks in accordance with the Regulations on the • made a decision on changing the composition of the Board activities was performed in accordance with the The Board of Directors was elected on 24 April 2020 in Corporate Secretary. Management Board; recommendations of the Russian Corporate Governance line with the Company’s goals and development strategy. Code. Self-evaluation of the Board of Directors Members of the Board of Directors are recognized 102‑33 • made a decision on NOVATEK’s participation in the performance based on the results of the corporate year is professionals able to make decisions related to strategic The Board of Directors meets as and when required, but Arctic Economic Council; and carried out by filling out a questionnaire by each member planning, production, international cooperation and at least once every two months. The meeting agenda of the Board of Directors. business conduct, risk management, analysis of is set by the Chairman of the Board of Directors based • approved the activity plan of NOVATEK’s Internal Audit financial statements, HR management, marketing, and on a request to convene the meeting, which can be Division for 2021. During the evaluation process, the key areas of the Board sustainability. initiated by the Chairman or members of the Board of of Directors’ and Board Committees’ activities were Directors, Revision Commission, officer responsible for 102‑28 analyzed, including the formation of strategy, supervisory When assessing nominees to the Board of Directors, the organization and performance of internal audit (head Pursuant to the Regulations on Performance Evaluation and control functions, effectiveness of interaction with the Company is guided by the Listing Rules of the of the business unit responsible for the organization and of the Board of Directors and the Board Committees, the top management, risk management, remuneration, Moscow Exchange (MOEX) and the Listing Rules of the UK performance of internal audit), Auditor, executive body, the Company provides for conducting internal self- succession and development of key managers. Financial Conduct Authority (FCA) in terms of the number as well as shareholders jointly holding at least 10% of evaluation and external evaluation. Self-evaluation is an of independent directors and their compliance with ordinary shares. in-house evaluation run annually by completing anonymous Based on the evaluation, the areas for improvement of the independence criteria. questionnaires by each member of the Board of Directors, Board of Directors’ performance are determined. while an independent qualified advisor runs external Three out of nine members of the Board of Directors are Board activities during corporate year 20201 evaluation once every three years. The outcomes of both independent directors. In 2019 and 2020, new members evaluations are included in the Company’s annual report were elected to the Board of Directors: Arnaud Le Foll 102‑34 102‑31 102‑29 was elected in 2019, and Tatyana Mitrova was elected During corporate year 2020, the Board of Directors met 102‑22 in 2020. In the reporting year, a woman was elected to 13 times, of which three meetings were held in person. At NOVATEK’s Board of Directors in corporate year 20202 the Company’s Board of Directors for the first time. Five these meetings, the Board of Directors: out of nine elected members of the Board of Directors – Full name Independent/executive Position on the Board of Directors/Board Committees Arnaud Le Foll, Michael Borrell, Robert Castaigne, Viktor • reviewed and approved the Company’s 2020 full year Orlov, and Tatyana Mitrova – have served on the Board operating and financial results; Alexander E. Natalenko Chairman of the Board of Directors since 2004 for less than seven years. The Chairman of the Board of Chairman of the Strategy Committee (till 30 April 2020) Directors is not a member of the Company’s executive • recommended an interim dividend payment for the first Member of the Strategy Committee body. half of 2020, based on interim financial results for the Andrei I. Akimov Member of the Board of Directors since 2006 period, and a full year dividend payment for 2020, based Member of the Strategy Committee 102‑27 102‑29 on full year financial results; The Board members hold regular meetings with NOVATEK’s Arnaud Le Foll Member of the Board of Directors since 2019 management to acquire a detailed understanding of • reviewed NOVATEK’s sustainability performance and Member of the Strategy Committee NOVATEK’s business activities, strategy and the key approved the Company’s Sustainability Report 2019; risks impacting the business. In addition to these formal Michael Borrell Member of the Board of Directors since 2015 processes, directors have access to the Company’s • approved Environmental and Climate Change targets as Member of the Strategy Committee medium-level managers for both formal and informal part of NOVATEK’s Corporate Strategy to 2030; discussions to ensure regular exchange of information Robert Castaigne Independent Independent Director since 2015 needed to participate in the Board meetings and make • made decisions to convene the Annual and Member of the Remuneration and Nomination Committee balanced decisions in a timely manner. Extraordinary General Meetings of Shareholders. During Chairman of the Audit Committee the meetings held in 2020, telecommunications facilities During the yearly review of the Annual Report, the were used to provide shareholders with remote access Leonid V. Mikhelson Executive Member of the Board of Directors since 2003 Board of Directors is provided with the information on to participate and to complete electronic ballot forms; Chairman of the Management Board the Company’s social and charitable activities in the regions of operation, as well as a dedicated Corporate • approved amendments to NOVATEK’s Regulations on Tatyana A. Mitrova Independent Member of the Board of Directors since 2020 Governance Code Compliance Report. A separate Dividend Policy; Chairwoman of the Strategy Committee (from 30 April 2020) report on the Company’s social and charitable activities Member of the Audit Committee (from 30 April 2020) is reviewed at the meetings of the Remuneration and • reviewed and approved NOVATEK’s business plan for Member of the Remuneration and Nomination Committee (from 30 Nomination Committee. At these meetings, the Board 2021; April 2020) of Directors annually reviews the report on occupational Viktor P. Orlov Independent Independent Director since 2014 health and safety. NOVATEK’s Sustainability Report is • as part of the Arctic LNG 2 project, the Board of Chairman of the Remuneration and Nomination Committee reviewed and approved at a meeting of the Company’s Directors made a number of decisions to provide the Member of the Audit Committee Board of Directors once a year. project with Arc7 ice class tankers; Gennady N. Timchenko Member of the Board of Directors since 2009 Member of the Strategy Committee
1. From the Annual General Meeting of Shareholders on 24 April 2020 until the Annual General Meeting of Shareholders on 23 April 2021. 2. From the Annual General Meeting of Shareholders on 24 April 2020 until the Annual General Meeting of Shareholders on 23 April 2021.
62 63 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Remuneration and Nomination Committee • made recommendations to the Board of Directors to form the Board Committees in accordance with 102‑31 recommendations of the Corporate Governance The primary functions of the Remuneration and Code as well as information about Board members; Nomination Committee are to develop an efficient and 7 3 transparent remuneration practice of the Company’s • made recommendations to the General Meeting governance bodies, enhance the professional of Shareholders on remuneration to the Board Meetings of Remuneration Board Committees expertise, and improve the Board of Directors’ members; and Nomination Committee efficiency and effectiveness2. The Committee’s objective is also to prepare recommendations • reviewed the report on self-evaluation of NOVATEK’s with sustainable development to the Company’s Board of Directors for making Board of Directors and Board Committees; and functions priority decisions in sustainability, industrial safety, environmental protection, climate change, corporate • other matters within the competence of the governance and social activities. Committee were considered. Board Committees The Audit Committee works actively with the Revision Commission, the external Auditor and the Company’s Moreover, once a year, in the framework of non- 102‑18 executive bodies, inviting NOVATEK’s managers responsible financial reporting, the Committee discusses matters Strategy Committee The Company has three Board Committees: the for the preparation of financial statements to attend the of sustainable development, and twice a year – social Audit Committee, the Remuneration and Nomination Committee meetings. and HR matters. The Committee is also responsible for The primary functions of the Strategy Committee are Committee and the Strategy Committee. The building a stronger Board of Directors and enhancing the determination of the Company’s strategic goals Committees’ activities are governed by committee- 102‑29 102‑31 its performance. and control over the implementation of the strategy, specific regulations approved by the Board of Directors In corporate year 2020, the Audit Committee met four as well as recommendations on the dividend policy3. and available on our official website. times, including two meetings in person, where: 102‑29 102‑31 Since 2019, sustainable development was included In corporate year 2020, the Committee met four times, 102‑29 • two meetings were held with the Company’s external in the scope of the Committee’s responsibility. The including two meetings in person, where: The Committees play a vital role in ensuring that Auditor to discuss the Audit Plan and review the report Committee prepares recommendations to the Board the high standards of corporate governance are on the audit of the Company’s activities during the year; of Directors for decision-making on sustainability, • recommendations were made regarding the amount maintained throughout the Company and that specific particularly on priorities in sustainable development, and form of dividend payment for the first six decisions are previewed, analyzed, and the necessary • the Company’s risk map was reviewed and key risks occupational and environmental safety, climate action, months and full year; recommendations are issued prior to general Board were analyzed, including sustainability and climate risks corporate governance, and social policy. discussions. The Board Committees conduct annual in particular; • basic parameters of NOVATEK’s (consolidated) reviews of the Company’s risk map and risk appetite, In corporate year 2020, the Remuneration and business plan for 2021 were previewed and HR policy and personnel development, as well as • the reports on compliance with the Information Policy Nomination Committee met seven times, including two recommended for approval; occupational health and safety initiatives. Members of and Anti-Corruption Policy were reviewed; meetings in person, where: the Board Committees have the required professional • the progress on NOVATEK’s corporate strategy to experience for assessments and recommendations in • the Company’s quarterly financial performance reports • NOVATEK’s Sustainability Report 2019 was reviewed 2030 was reviewed, particularly: the respective areas of the Company’s activities. and the impact of COVID-19 on NOVATEK’s operations and recommended for approval by the Board of and investments were reviewed; Directors; – analysis of internal and external markets, logistics, In order to carry out their duties, the Committees may risks and their assessment, and targets; request information or documents from the members • the reports on the activities of the Company’s Internal • recommendations were made to the Board of – implementation of the Arctic LNG 2 project; of the Company’s executive bodies or heads of the Audit Division for the first six months and full year were Directors on the approval of Environmental and – status of, and progress on preparing, the mineral Company’s relevant business units. The Committees approved; Climate Change targets as part of NOVATEK’s resource base of the Arctic LNG 1 project; may engage external experts and advisors with required corporate strategy to 2030; – Jurassic resource potential and technological professional knowledge and skills to provide an unbiased • recommendations to the Board of Directors on challenges in reserve preparation and view on respective matters. approving the Company’s Annual Report and Internal • NOVATEK Group’s HSE performance report 2019 was development; Audit Plan were made; reviewed; – formation and implementation of the development strategy for the icebreaking and tanker fleet and Audit Committee • recommendations on the Company’s Auditor candidate • recommendations were made in line with the navigation management; and the amount of the Auditor’s remuneration were NOVATEK Group’s Executive Bodies and Other The primary function of the Audit Committee is control made; Key Employees Remuneration and Expense • recommendations were made to the Board of over financial and operating activities of the Company1. In Reimbursement Policy; Directors on the approval of the new version of order to assist the Board in performing control functions, • the conclusion of the Internal Audit Division on NOVATEK’s Regulations on Dividend Policy; and the Committee is responsible for, inter alia, evaluating assessing the reliability and effectiveness of the • NOVATEK’s HR management policy performance the accuracy and completeness of the Company’s risk management, internal control and corporate report 2020 was reviewed; • other matters within the competence of the full year financial statements, the Company’s Auditor governance systems was considered; and Committee were considered. candidate and the Auditor’s report, and the effectiveness • the report on NOVATEK’s social performance in the of the Company’s internal control procedures and risk • other issues within the competence of the Audit regions of operation in 2020 was reviewed; management system. Committee were considered.
2. Details on the functions of the Remuneration and Nomination Committee are available in the Regulations on the Remuneration and Nomination Committee of the Board of Directors of NOVATEK, pp. 3–5. 1. Details on the Audit Committee’s functions are available in the Regulations on the Audit Committee of the Board of Directors of 3. Details on the functions of the Strategy Committee are available in the Regulations on the Strategy Committee of the Board of NOVATEK, pp. 3–5. Directors of NOVATEK, pp. 4–5.
64 65 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Management Board • approval of NOVATEK’s environmental strategy to 2030 Remuneration to Members of of the Board of Directors is paid fixed remuneration and a comprehensive implementation program; the Board of Directors and for the performance of his or her functions in the NOVATEK’s Management Board is a collegial executive amount of RR 30 mln per corporate year. Members of body responsible for the management of the Company’s • inclusion of hydrogen energy into the Company’s long- Management Board the Board of Directors are also paid remuneration for day-to-day operations. The Management Board is term development strategy; participating in meetings of the Board of Directors in governed by the laws of the Russian Federation, 102‑35 102‑36 the maximum amount of RR 4.5 mln per corporate year NOVATEK’s Articles of Association, resolutions of the • review of the long-term forecast for gas, condensate The procedure for calculating the remuneration and and remuneration for attending meetings of the Board General Meetings of Shareholders and the Board of and oil production within the Unified Gas Supply compensations to members of NOVATEK’s Board Committees limited to RR 3 mln per corporate year. Directors, and by internal documents1. System of Russia; of Directors is governed by the Regulations on The Board members are also compensated for travel Remuneration and Compensations Payable to Members and lodging expenses related to the discharge of their The members of the Management Board are elected • approval of the core concept of social policy for 2021; of NOVATEK’s Board of Directors approved by the Annual functions. by the Board of Directors from among the Company’s and General Meeting of Shareholders. According to the key employees. The Management Board is accountable Regulations, the remuneration consists of the following The procedure for, and criteria of, calculating to the Board of Directors and the General Meeting of • review of key macro parameters and budgets for future elements: remuneration to the Chairman and members of Shareholders. The Chairman of the Management Board periods and budget execution for previous periods. NOVATEK’s Management Board, as well as the is responsible for leading the Board and ensuring its • fixed part of remuneration; compensation of their expenses, are prescribed in effectiveness as well as organizing the Management Management Board members from 1 January 2020 the Regulations on the Management Board, as well as Board meetings and implementing decisions of the to 31 December 2020: • remuneration for participating in the meetings of the the NOVATEK Group’s Executive Bodies and Other Key General Meeting of Shareholders and the Board of Board of Directors; and Employees Remuneration and Expense Reimbursement Directors. The Management Board was elected by Leonid V. Mikhelson – Chairman; Policy. Shareholders are entitled to exercise their voting the Board of Directors on 25 August 2017 (Minutes No. • remuneration for participating in the meetings of the right to determine the amount of remuneration payable 198 dated 25 August 2017) with further amendments by Lev V. Feodosyev – First Deputy Chairman; Board Committees. in accordance with the “one share, one vote” rule. In resolution of the Board of Directors on 12 July 2018, 21 line with the Policy, the remuneration is linked to KPIs, September 2018, 14 November 2018, 14 December 2018, 19 Alexander M. Fridman – First Deputy Chairman (powers The fixed part of remuneration to a Board member including ESG performance. March 2019, and 2 November 2020. were terminated on 2 November 2020); constitutes RR 15 mln per corporate year. The Chairman
102‑19 102‑20 102‑21 102‑29 102‑31 Evgeniy N. Ambrosov – Deputy Chairman of the The Management Board helps achieve objectives set by Management Board – Director for Marine Operations, Committees membership from 24 April 2020 to 23 April 2021 the Board of Directors and implements the Company’s Shipping and Logistics (elected on 2 November 2020); development strategy through supervision of business Audit Committee Strategy Committee Remuneration and Nomination units in certain lines of business, including operational, Vladimir A. Baskov – Deputy Chairman; Committee environmental, financial and economic, social and legal. Chairperson Robert Castaigne Tatyana A. Mitrova Viktor P. Orlov The Management Board holds over 10 meetings every Viktor N. Belyakov – Deputy Chairman of the Management quarter. Members of the Management Board report to Board for Economics and Finance; Members Tatyana A. Mitrova Andrei I. Akimov Tatyana A. Mitrova its Chairman. Deputy Chairmen of the Management Viktor P. Orlov Arnaud Le Foll Robert Castaigne Board are in charge of economic, environmental, social Eduard S. Gudkov – Deputy Chairman; and other matters related to the Company’s business. Michael Borrell Mark A. Gyetvay – Deputy Chairman; Alexander E. Natalenko HSE matters are the responsibility of the Deputy Chairman of the Management Board. Evgeny A. Kot – Deputy Chairman – LNG Director; Gennady N. Timchenko
Economic matters fall within the remit of Deputy Tatyana S. Kuznetsova – Deputy Chairwoman; Chairman of the Management Board for Economics and Remuneration to the members of NOVATEK’s Board of Directors and Management Board in 2020, RR mln Finance. Denis B. Solovyоv – Deputy Chairman – Director of the Communications Development Department; Board of Directors21 Management Board Social matters are the responsibility of the Deputy Total paid, including: 212.3 7,144.0 Chairman of the Management Board, who delegates Sergey G. Solovyov – Deputy Chairman – Director for achievement of social objectives to the HR Department Geology; Salaries – 949.4 and the Social Development Department. Bonuses – 6,175.6 Ilya V. Tafintsev – Deputy Chairman; In 2020, the Board reviewed the following matters Fees 210.6 – related to sustainability, economic, environmental and Sergey V. Vasyunin – Deputy Chairman – Operations Other compensations and property advancements 1.7 19.0 social impacts, and associated risks and opportunities: Director.
2. Some members of NOVATEK’s Board of Directors are simultaneously members of the Management Board. Payments to such members in relation to their activities as members of the Management Board are included in the total payments to members of the 1. Details on the competence of the Management Board are available in NOVATEK’s Articles of Association, pp. 24–26. Management Board.
66 67 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
1 Internal Control and Audit The primary objects of internal control are NOVATEK, its Powers, duties and responsibilities for specific risk 102‑31 subsidiaries and joint ventures, their business units, as well management procedures are delegated to different At least once a year, the Audit Committee evaluates NOVATEK has a system of internal controls over financial as their ongoing business processes. governance levels of the Company depending on the the Company’s risk management performance, including and business operations aligned with Russian laws and best assessment of financial impact of risk. The Company’s economic, environmental and social risks. Following the international practices. The internal control system is an The Annual General Meeting of Shareholders approves risk management policy is set out in Regulations on Risk evaluation in the reporting year, the Audit Committee integral part of the risk management system and is aligned an external auditor to conduct an independent review of Management and Internal Control System of NOVATEK recognized NOVATEK’s risk management activities as with the relevant risks and strategic goals of NOVATEK. NOVATEK’s accounting (financial) statements. guided by the following international standards: COSO compliant with the Company’s respective policy. Internal Control – Integrated Framework, and Enterprise The primary objectives of the internal control system are In accordance with auditing standards, in order to maintain Risk Management – Integrated Framework (ERM COSO). In corporate year 20202, the Audit Committee paid the implementation of NOVATEK’s strategy, protection independence, the Company’s external Auditor regularly Certain elements of ISO 31000 Risk Management – significant attention to risk management policies and of shareholder interests, asset integrity, efficiency of rotates its key audit partner, at least once every seven Guidelines have also been integrated into NOVATEK’s risk processes in the Company and reviewed financial, financial and business operations, and compliance with years. Last time, the Auditor’s partner was rotated in 2018. management system. The risk management system was operational, legal, and other risks at in-person meetings. applicable laws and the Group’s internal regulations. not based on the Risk Management Standard (RMS FERMA) Furthermore, in 2020, the implementation of NOVATEK’s developed by IRM, AIRMIC and ALARM, but its components anti-corruption and information policies was reviewed and The internal control system functions on an ongoing do not contradict the above standards which were taken the activity plan for the next period was approved. basis and covers all the Company’s lines of business and Risk Management into account to varying degrees. business processes at all management levels. The Management Board discloses a list of risks and 102‑15 To mitigate subjectivity restricting the risk management approaches to risk management in the Annual Report3. The responsibility for defining the principles of, and NOVATEK’s activities are subject to risks inherent in the oil process in a negative way, the Company has in place a approaches to, organizing the internal control system and gas sector. multilevel system of risk management and internal control. The section contains a list of the Company’s major risks, is vested in the Board of Directors. The Chairman of with a detailed description of sustainability risks. NOVATEK the Management Board ensures efficient functioning of NOVATEK operates and continuously develops a multilevel 102‑29 102‑30 pays significant attention to risks related to climate the internal control system. The Internal Audit Division system of risk management and internal control. The In order to ensure a uniform methodology and coordinate change and GHG emissions. NOVATEK’s risk management evaluates the efficiency of the risk management, internal Company’s risk management and internal control system risk management activities, the Company has established system enables integrating climate change risks into both control and corporate governance system. is aimed at protecting shareholder and other stakeholder the Risk Control Division. The risk management process executive decision-making and day-to-day operations. rights and legitimate interests, timely adjusting to internal involves the Company’s top management, including the In 2020, climate change risks were added to the list of The internal control system comprises the Board of and external changes, providing reasonable assurance Board of Directors’ Audit Committee. The Committee is key risks since climate change is a key issue for the oil Directors, Audit Committee, Chairman of the Management regarding the achievement of the Company’s objectives responsible for supervising the reliability and efficiency and gas industry and business in general. The COVID-19 Board, Management Board, Revision Commission, and and implementing its sustainable development strategy. of the risk management system and reviewing it. As part pandemic brought epidemic risks to the forefront in 2020. Internal Audit Division. of its efforts, the Committee helps monitor identified Conduct risks were updated to reflect the Company’s risks and adjust risk mitigating initiatives as needed. focus on human rights. Matters related to risk appetite and the risk management Strategic level systems are reviewed annually.
Reports to Risks of 102‑15 Board of Directors Audit Committee emergencies NOVATEK’s major risks and incidents Operational risks Financial risks
Risks of emergencies and Strategic risks Credit risk Tactical level Environmental incidents
Reports to Reports Conduct risks Reinvestment risk risks Performance evaluation Monopoly risks Social risks Interest risks Chairman of the Reports to Internal Competitive risks Terrorism risks Currency risks Management Board Audit Division Conduct Risks in procurement of risks materials, works and services Country risk Liquidity risk
Commodity price risks Regional risk Inflation risk Organizational and operational level Geological risks Risks of information Social technology and information Legal risks Risk identification and assessment risks Risk of early termination, security (cyber risks) Risk of changes in legislation Reports to suspension or restriction Management Board Risk Control Division Climate change risks of subsoil use rights Litigation risks Epidemic risks/COVID-19 Local suppliers Other Environmental risks Risk of sanctions risks 22% Foreign suppliers Business units Project risks
2. From the Annual General Meeting of Shareholders on 24 April 2020 until the Annual General Meeting of Shareholders on 23 April 2021. 1. Details on Internal Control and Audit are available in NOVATEK’s Annual Report 2020, pp. 68-69. 3. Details on risks are available in NOVATEK’s Annual Report 2020, pp. 74–87. 78% Board of Directors Recommendations on current 68 69 approves climate change initiatives sustainability trends, including climate change
Remuneration and Nomination Committee Supreme governance body Revision with a sustainability function General Meeting of Shareholders Commission oversees climate change matters on behalf of the Board of Directors
Strategic governance body Board Committees Board of Directors Deputy Chairman of the ESG matters Deputy Chairman of the Management Board – Management Board Operations Director Remuneration (Sustainable Strategy Audit in charge of the Integrated HSE Management System (IMS) and Nomination Committee Committee development) Committee Chairman of the Management Board Internal Audit Division Collegial executive body Gas and Condensate HSE Department Director for Investor Relations Management Board Production (GHG emissions, APG) Alternative Energy Department and Processing and Offshore (Sustainable Department Technologies development) Corporate Business Board of Directors (Energy efficiency) (Alternative energy) Secretary units
Independent Board of Directors members THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Sustainability risks Risk Risk description Risk management approaches used by the Company
Risk Risk description Risk management approaches used by the Company The Company is exposed to the risks In 2011, in order to minimize conduct risks, the Company introduced a of disturbed relationships within the Code of Business Conduct and Ethics. NOVATEK subsidiaries and joint The Company continuously monitors compliance with industrial safety Company and with its subsidiaries ventures are subject to the risks requirements. The Company develops and implements organizational Conduct risks and joint ventures, shareholders, To exclude conduct risks from its shareholder and investor relations, of emergencies and incidents at and technical measures aimed at mitigating the risks of emergencies investors, the government, the the Company is governed by the Code of Business Conduct and Risks of hazardous production facilities, and incidents and reducing potential losses as part of its Integrated public, consumers, suppliers, or other Ethics and the applicable Russian Federation and UK laws regulating emergencies ship transport facilities for the HSE Management System in line with the OHSAS 18001 (ISO 45001:2018) corporate entities or individuals, public companies. and incidents1 transportation of liquid hydrocarbons standard. The Company holds property and business interruption including the risk of fraud, corruption and LNG, that may result in harm to insurance policies, insures transported cargo and the charterer’s and conflict of interest, as well as the To exclude conduct risks from its relations with third parties, the the life or health of employees or third liability. risk of human rights violations. Company holds tenders to select counterparties and has a well- parties, entail business interruption, established internal control and audit system. hazardous emissions or spills, which in The Company adheres to the principle of responsible investment in turn may have a negative impact on production, which implies that new design solutions, technologies and The Anti-Corruption Policy in place since 2014 establishes key the Company’s business reputation equipment installed help significantly mitigate accident risks. principles and standards of anti-corruption practices for employees and financial performance. and stipulates a set of corruption prevention measures. As part The Company has in place a Central Dispatch Office (CDO) to of the Anti-Corruption Policy implementation, a Security Hotline promptly respond to production incidents. The CDO ensures operates 24/7. centralized monitoring of well construction and workover in addition to the control of production, treatment and transportation Since 2016, the Company has had a procedure for notification and processes. management of conflicts of interest that employees may come The Company is exposed to the The Company has an environmental management system compliant across in performing their job duties. probability of events having adverse with ISO 14001 to ensure rational use of resources and minimize consequences for the environment the adverse effect the Company’s operations may have on the In 2020, the Company adopted the Supplier Code of Conduct for Environmental and caused by a negative impact of environment. NOVATEK Group Suppliers, which contains recommendations and risks its economic and other activities, principles related to business ethics and human rights that NOVATEK as well as natural and man-made The Company adheres to the principle of responsible investment in expects its suppliers to follow emergencies. operations, which implies that new design solutions, technologies and The Company is exposed to the The Company strives to ensure compliance of its social programs equipment installed help minimize negative environmental impacts, following risks of a social nature: with the industry’s average level and uses the most up-to-date and ensures emergency preparedness. mechanisms for attracting and retaining highly professional Social risks • internal risks associated with a employees. Implementation of projects in the Russian Arctic zone is accompanied possible incompliance of social by comprehensive monitoring of marine and terrestrial ecosystems, programs implemented by the The Company’s production facilities are located outside densely as well as subsurface environment, including permafrost soils and Company with the industry’s populated territories, and the Company monitors compliance with cryogenic processes, to confirm the efficiency and sufficiency of average level that may lead to a applicable rules and regulations while operating its facilities. The risks nature protection design solutions and receive prompt information higher labor turnover; and related to possible military conflicts, announcement of a state of on changes in environmental conditions in the Company’s regions of • external risks associated with emergency, or strikes are insignificant, as the Company operates in operation. potential impediments to normal economically and socially stable regions. production activities caused by Environmental support of LNG projects with participation of communities living in proximity to joint ventures is based on both Russian environmental laws and production facilities. international standards and best available practices in the industry. The Company is exposed to The Company pursues a policy aimed at continuously improving As part of the Climate Doctrine of the Russian Federation, the information technology and information security processes and ensuring their compliance Company has developed a Corporate Greenhouse Gas Emission information security risks, such as: with law, international standards and best practices in order to Management System (to account for, and plan actions to reduce, Risks of improve information protection and enhance the confidence of greenhouse gas emissions, inter alia, by introducing innovative information • the risk of confidential information contractors, partners and investors. One of the priorities is to maintain technologies to curb greenhouse gas emissions). In particular, technology leaks; and confidentiality, security and reliability when handling confidential in August 2020, the Company’s Board of Directors approved and informa- • the risk of business interruption information, including personal data, trade secrets, insider information, Environmental and Climate Change targets of the Company for tion security and emergencies as a result of confidential information of partners and other organizations that the the period up to 2030, including emission reduction, rational use of (cyber risks) computer security incidents. Company has lawfully become aware of. associated petroleum gas and waste disposal. In accordance with the requirements of Federal Law No. 187-FZ dated 26 July 2017, essential elements of the Company’s critical information infrastructure were broken down into categories and a relevant centralized information security system was designed.
An information technology development strategy was developed and approved to ensure the NOVATEK Group’s sustainable development.
1. Including risks of disasters. 70 71 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Risk Risk description Risk management approaches used by the Company NOVATEK uses stress testing to assess its resilience • construction risk insurance; against the potential impact of the most significant The Company’s business may be Risks and opportunities associated with climate change are taken into risks as well as possible approaches to risk • insurance of risks related to prospecting, exploration affected by the following climate account in the Company’s business strategy. The Company regularly management, which may be applied to prevent or and production (risk of loss of control over a well); change risks: monitors market trends, keeps track of changes in legislation regulating mitigate the impact of the key risks. In particular, the greenhouse gas emissions, assesses the impact of such changes and Climate • transitional risks that arise during Company annually conducts stress testing by doing a • transport insurance; updates its plans accordingly, invests into the development of innovative change risks transition to a lower-carbon simulation for the scenarios of risks of emergencies and energy-efficient zero-emission technologies, considers the risks and economy, e.g., due to changes in opportunities of current and expected environmental conditions to incidents at production facilities to assess potential • cargo insurance; stakeholder behavior, changes in efficiently manage the project portfolio and maintain sustainable damage to property and gross profit losses (the data legislation, and other changes. development. are used to provide insurance protection for NOVATEK) • directors’, officers’ and companies’ liability insurance If they materialize, these risks and develops additional initiatives to mitigate the (D&O insurance); can cause additional expenses, The Company pays significant attention to risks related to climate implications of those scenarios. Moreover, the outlook hydrocarbon prices below the change and GHG emissions. The Company’s risk management system of financial performance is assessed annually and when • charterers’ liability insurance; and forecast, reduced revenues, and enables integrating climate change risks into both executive decision- necessary due to significant macroeconomic changes, limited development opportunities; making and day-to-day operations. and including the outlook of revenues and expenses, cash • employees voluntary health insurance as part of the • physical risks that directly affect NOVATEK has developed and is implementing its GHG Emissions Manage- flows, investment opportunities, financial covenants social benefits package. facilities and are caused by a ment System Standard. Pursuant to the standard, GHG emission qualifi- and other indicators in numerous scenarios of the key major short-term impact (e.g., an cation and reporting are included in the Integrated Management System. drivers, including macro parameters, prices in global Since 2013, the Company has in place a comprehensive act of God) or long-term climate energy markets, the number of investment projects program of property and business risk insurance with The Company develops a GHG emission reporting system and uses effi- change (permafrost degradation, being implemented, and other parameters of the respect to key assets of NOVATEK, its subsidiaries and global sea level change, periods of cient modern technologies to reduce emissions during production, pro- Company’s operations. joint ventures. The cumulative insured amount for the abnormally high temperatures). cessing and transportation of gas and liquid hydrocarbons, natural gas risks of property damage and business interruption as liquefaction, power generation, and other processes. The Company sets ambitious targets, which when achieved would help reduce GHG emis- at the end of 2020 was RR 910 bln. The implemented sions in accordance with global initiatives, and climate change action is Risk insurance program is viewed by the Company’s management as an among the Company’s sustainable development priorities. In August 2020, efficient measure for mitigating the consequences of NOVATEK’s Board of Directors approved the Company’s Environmental Risk insurance is an integral part of NOVATEK’s risk potential accidents and provides additional guarantees and Climate Change targets for the period up to 2030, including emission management system. In 2020, the insurance coverage for the attainment of the expected net profit and key reduction, rational use of associated petroleum gas, and waste disposal. guaranteed adequate protection against the risks of indicators of the Company’s performance. Beyond damage to the business of NOVATEK, its subsidiaries the scope of the comprehensive program, given the The Company assesses climate change risks of physical impact and cli- and joint ventures. Insurance coverage is provided by project’s scale, Yamal LNG is insured against property mate change implications both at the engineering and operation stages, and makes appropriate provisions. NOVATEK regularly performs cryolog- reputable insurance companies that have high ratings damage and business interruption. 1 ical monitoring, which shows that the risk of permafrost thawing and from leading rating agencies with partial reinsurance of degradation is low at the moment and has no significant impact on the risks by major international insurance and reinsurance In the reporting year, no insured major accidents or Company’s operations. To prevent potential negative implications of cli- companies. incidents occurred. mate change and assess the condition of permafrost soil and the tem- perature range at all of the Company’s facilities, NOVATEK uses advanced For more than 15 years, NOVATEK has maintained the technologies and equipment for thermal stabilization of soil where foun- Obligatory risk insurance directors’, officers’ and companies’ liability insurance dation piles are driven during the construction phase. The Company holds (D&O insurance) covering the Group and the Company’s property and business interruption insurance policies against these risks. NOVATEK fully meets the requirements of the applicable top management against possible third-party claims The spread of the novel coronavirus The Company assessed potential impact of COVID-19 on employees Russian laws for maintaining obligatory insurance, for any losses incurred through any wrong action (COVID-19) caused financial and and operations, and has developed appropriate response plans. For such as civil liability insurance of owners of hazardous (or decision) by its governance bodies as well as in economic tensions in the markets instance, the Company is investing in tools enabling efficient remote production facilities and owners of vehicles. connection with claims against the Company under Epidemic risks/ around the world, and this is beyond work. its securities. The overall limit of respective insurance COVID-19 the Group management’s control. The NOVATEK Group also fully complies with legislative coverage is EUR 120 mln. The existing insurance coverage NOVATEK’s management takes all necessary precautions to protect To ensure uninterrupted operations insurance requirements in the countries where it is in line with international insurance standards in terms during the pandemic, special the health and safety of its employees and their families, as operates. of the scope of risk cover and limits of indemnity. measures had to be introduced well as counterparties from the spread of the coronavirus while to ensure business continuity and fulfilling its obligations to supply energy resources domestically and protect the health and safety of internationally. NOVATEK maintains close cooperation with federal, the Company’s employees and other regional and local authorities, as well as with partners to contain the Optional risk insurance stakeholders. The magnitude and spread of the coronavirus, and takes necessary action to minimize duration of these events remain potential disruptions. To reduce the risk of financial losses, the Company indefinite and may continue to maintains the following types of optional insurance: NOVATEK complies with all recommended measures to contain the affect the Group’s revenues, cash pandemic. Additional sanitary protection measures have been flows and financial standing. • insurance of the risk of property damage/loss, including implemented at the Company’s offices and facilities: frequent sanitary cleaning is conducted at the Company’s premises, additional the risk of mechanical failures; disinfectant dispensers are installed, and employees are provided with masks and gloves for obligatory use at workplaces. Many employees in • insurance of the risk of damage from business the regions of our operation are working remotely, business trips are interruption (business risks); limited, and all our employees have detailed instructions on prevention measures. In the regions of operation, the Company organizes regular testing of its employees, purchases personal protective equipment, and helps provide the necessary equipment, reagents and medical supplies to diagnostic laboratories and hospitals. 1. Standard & Poor’s, Fitch Ratings, Expert RA, A.M. Best.
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NOVATEK focuses its environmental protection Climate Change efforts on approaching climate change management strategically while consistently reducing its GHG emissions. NOVATEK embraces the Paris Climate Agreement ratified by the Russian Federation in 2019 and makes every effort to curb GHG emissions.
% % mmt of CO e 31 8 1.2 2 Reduction of GHG emissions Reduction of GHG emissions GHG emissions prevented due to the per unit of production in the per ton of LNG produced reinjection of APG at the Yarudeyskoye field Upstream segment
74 75 Strategic level THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Reports to Risks of Board of Directors Audit Committee Climate Change Approaches NOVATEK’s carbon footprint reduction targets reduction and an increase in the APG utilization rate. The Our GHG Emissions Management Systememergencies designed in Board of Directors approves and follows up sustainability accordance with the Climate Doctrine ofand the incidents Russian Climate change is a global challenge and a key issue for initiatives aimed at ensuring information transparency Federation is an integral part of the Company’s both the oil and gas industry and business in general. Reduce GHG emissions and generating long-term value for investors and other Environmental Management System. As part of this NOVATEK focuses its environmental protection efforts on Tacticalstakeholders. level system, NOVATEK has compiled an inventory of GHG Environmental
approaching climate change management strategically emissions to Reports sources and developed an automated GHG risks while consistently reducing its greenhouse gas emissions. • By 2025, cut methane emissions from operations of LNG The Audit Committee of the Board of Directors, whose estimation module within the GHG Management System, Performance evaluation fueling stations by 20% responsibility includes monitoring and analyzing of the defining specific GHG emissions targets for each business NOVATEK embraces the Paris Climate Agreement ratified risk managementChairman framework of the effectiveness,Reports has to a strong lineInternal (hydrocarbon production and processing, and LNG by the Russian Federation in 2019 and makes every effort • Reduce the carbon footprint of our products sold focus on climateManagement change Board risks. From 2019, the Board’s Auditproduction). Division to curb GHG emissions. internationally Remuneration and Nomination Committee took over the Conduct risks responsibility for sustainability monitoring. The Committee Issues related to GHG emissions4 fall within the authority NOVATEK’s business strategy published in 2017 applied prepares recommendations to inform decisions made by of NOVATEK’s top management, and in particular Deputy the forecasts from major research firms, which included Develop alternative energy Organizationalthe Company’s and Boardoperational of Directors level on sustainability issues, Chairman of the Management Board – Operations scenarios accounting for the Paris Climate Agreement including on climate change. Director, who is responsible for the Integrated HSE in terms of reducing global CO emissions. The forecasts Management System. Social 2 Risk identification and assessment risks were based on the following key assumptions: • Ramp up the production of hydrogen, methane- The Company’s climate change strategy is closely linked hydrogen mixtures, ammonia and other low-carbon fuels to minimizing its environmental footprint.Reports Assessment to Management Board Risk Control Division • significant progress in reducing GHG emissions and air produced from natural gas of climate change risks and opportunities is a standard pollution; process within NOVATEK’s Environmental Management • Expand the use of renewables atLocal gas suppliersand condensate System operating to ISO 14001:2015. Other risks • a shift from coal to cleaner energy sources; production22% facilities Foreign suppliers Business units • improved energy efficiency; and Climate change management structure Improve energy efficiency • active spread of renewables.
In 2020, the Company’s Board of Directors approved • Use energy-efficient LNG78% production technologies Environmental and Climate Change targets, including GHG to increase the availability of LNG and reduce GHG Board of Directors Recommendations on current 1 emissions reduction . emissions approves climate change initiatives sustainability trends, including climate change • Continuously improve the energy efficiency of NOVATEK’s Environmental and Climate Change hydrocarbon production and processing targets to reduce greenhouse gas emissions2 Remuneration and Nomination Committee By 2030: Supply clean energy Supreme governance body Revision with a sustainability function General Meeting of Shareholders Commission oversees climate change matters on behalf reduce the methane emissions per unit of of the Board of Directors production in the production, processing and • By 2030, increase LNG production from Company’s LNG segments by 4% projects up to 70 mmtpa Strategic governance body Board Committees Board of Directors • By 2025, install LNG fueling stations along European Deputy Chairman of the reduce GHG emissions per unit of production Russia’s mainESG traffic matters arteries Deputy Chairman of the Management Board – Management Board in the upstream segment by 6% Operations Director Remuneration (Sustainable • By 2025, supply LNG to consumersStrategy in areas remoteAudit from in charge of the Integrated HSE Management System (IMS) and Nomination existing gas transmission infrastructureCommittee Committee development) Committee reduce GHG emissions perChairman ton of LNG of the produced by 5% Management Board Climate change management Internal Audit Division increase the APG utilization Collegial executive body Key climate change topics, including corporate Gas and Condensate HSE Department Director for Investor Relations rate to 99% Management Board governance, strategy, risk management, and climate Production (GHG emissions, APG) Alternative Energy Department change targets, are the responsibility of the Company’s and Processing and Offshore (Sustainable top management and are reviewed at the Board of Department Technologies development) In 2021,Corporate as part of its prioritized UN SDG ClimateBusiness Action, Directors’ meetings.Board of Directors (Energy efficiency) (Alternative energy) the CompanySecretary approved its targets to improveunits energy efficiency, expand the use of renewables, advance the In August 2020, NOVATEK’s Board of Directors approved production of hydrogen and methane/hydrogen mixes, the Company’s Environmental and ClimateIndependent Change Board as well as other low-carbon gas products3. targets for the period up to 2030, includingof Directors emissions members
1. Details are available in the Environmental Performance and Protection section, p. 90. 2. 2019 is the base year for the long-term targets. 3. Details are available in the Sustainable Development Strategy section, p. 26. 4. Details on GHG emissions are available in the Environmental Performance and Protection section on p. 100.
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Risks and Opportunities Research firms expect that the pledges made by leaders and global organizations to reduce methane are categorized into acute risks (for example, natural developed countries as signatories to the Paris emissions from its operations, improve the accuracy of disasters) and chronic risks (for example, permafrost 201‑2 Agreement, as well as carbon neutrality targets adopted its emissions data and work out measures to control degradation, higher temperatures leading to rising sea- NOVATEK’s risk management system enables integrating by many countries and a shift to a low-carbon economy methane emissions. NOVATEK’s GHG emissions and, in levels or periods of abnormally high temperatures). climate change risks into both executive decision-making will reduce the consumption of conventional fuels and particular, methane emissions rates are among the lowest and day-to-day operations. drive the demand for natural gas and LNG. in the global oil and gas sector as the bulk of its output NOVATEK operates an environmental management accounts for natural gas. system certified to ISO 14001:2015 to ensure sustainable Climate change risk management is an integral part of According to the International Energy Agency (IEA), coal- use of resources and minimize the adverse impact the NOVATEK’s multi-tier risk management system. Climate to-gas switching in power generation can provide “quick NOVATEK has developed and is implementing its GHG Company’s operations may have on the environment3. change risks are identified, analyzed and assessed by wins” for global emissions reductions. The total emissions Emissions Management System standard. Pursuant to the risk owners (heads of business lines and structural units) can be reduced by 1.2 gigatons of CO2 with existing power standard, GHG emissions qualification and reporting are The Company adheres to the principle of responsible in coordination with the Risk Control Division. Risks are infrastructure, which will bring the energy sector’s global included in the Integrated Management System. NOVATEK investment in operations, which implies that new design identified in line with a classification according to the emissions down by nearly 10%1. Between 2010 and 2018, assesses risks and opportunities at least once a year, solutions, technologies, and equipment installed help 2 recommendations of the Task Force on Climate-related coal-to-gas switching abated nearly 0.5 gigatons of CO2 . reviewing GHG emissions reports that are submitted minimize environmental impact. Financial Disclosures (TCFD). Materiality of climate change to the Company by subsidiaries and joint ventures. An risks is analyzed against the same criteria that are used Analysts estimate that, on average, the share of coal and unscheduled assessment of risks and opportunities Since 2008, NOVATEK has been annually reporting on its to assess other types of risks, including probability petroleum products in the global energy mix will decrease is conducted when the target indicators change, or a GHG emissions (including methane) and energy efficiency and financial impact. Financial impact is measured as while the share of natural gas will at least stay relatively stakeholder request is received. of its operations via the global Carbon Disclosure Project a combination of negative impact on gross profit or stable or, according to most forecasts, will gradually (CDP). EBITDA, damage to property, and/or additional costs. Risk increase. Subject to the volumetric growth of total energy 201‑2 materiality assessment is adjusted to newly identified consumption, global demand for natural gas and LNG is Climate change risks are usually categorized into 305‑4 external and internal factors. projected to grow. transition risks (related to the transition period) and Since 2019, the Company has been calculating the carbon physical risks: footprint of its products. In 2020, its GHG Intensity The Company analyzes climate change risks on an annual Natural gas remains the primary back-up fuel for ratio4 decreased by 1.02% year-on-year to 295.1 kg of basis in order to properly address them and work out renewables (solar and wind) and helps reduce emissions by • Transition risks can occur when moving towards a CO2 equivalent per barrel of oil equivalent (boe) of output, appropriate management measures. NOVATEK has a replacing coal, oil and refined products as energy sources, decarbonized economy including as a result of changes one of the lowest levels among international and Russian procedure for assessing climate change risks relating to which opens a strategic growth window for the Company. in stakeholder behavior, regulations or other changes oil and gas producers, which demonstrates a positive its physical impact on the Company’s operations at the (transition risks include carbon pricing, technology trend in the reduction of GHG emissions across the facility design, construction and operation stages as well Natural gas will be an integral part of the global energy advancement, change in consumer behavior, or failure Group. Moreover, for the first time, NOVATEK is disclosing as when preparing surveyor’s reports for risk insurance mix in the fundamental shift from environmentally to meet requirements of investors and other financial its Scope 3 GHG emissions from the use of Company’s purposes. This procedure is a standard element of harmful fossil fuels toward cleaner energy sources. The market players for climate change disclosure); production volumes for the “use of sold products” NOVATEK’s Environmental Management System certified Company’s Corporate Strategy to 2030 projects that category in Air Emissions sub-section5. to ISO 14001:2015. NOVATEK plans to update and improve LNG will play an important role in replacing coal for power • Physical risks can have a direct impact on assets or its approaches to climate change risk identification and generation, and its current, wider use as a marine and indirectly affect business value chains. Physical risks assessment going forward. transport fuel will continue to expand.
NOVATEK’s business strategy recognizes risks and For example, 62 mmt of LNG annually could replace up to opportunities related to climate change. The Company 152 mmt of bituminous coal, preventing emissions of more regularly monitors market trends, considers the risks and than 170 mmt of CO2, and contributing to global carbon opportunities of current and expected environmental footprint reduction. NOVATEK’s strategy also provides conditions to efficiently manage the Company’s project for promoting LNG and compressed natural gas as motor portfolio and maintain sustainable development, keeps fuels, being a more environmentally friendly alternative to track of changes in legislation regulating GHG emissions, diesel fuel and therefore contributing to lower emissions. assesses the impact of such changes and updates its plans accordingly, and invests into the development of The recent changes in environmental regulation also innovative energy-efficient zero-emission technologies. create strategic opportunities for NOVATEK. The new international environmental regulations on marine fuels The approach to climate change risk management we (IMO 2020) will have a large impact on shipping and have implemented allows us to enhance the sustainability shipbuilding industries, eliminating fuel oil and expanding of the Company’s strategy. The worldwide trend is to the share of LNG used as a marine fuel. shift to lower-carbon energy sources, which opens up great business prospects for NOVATEK as a natural gas In October 2020, NOVATEK joined the Methane Guiding and LNG producer. It also offers opportunities to expand Principles global initiative. The initiative is a voluntary into the emerging clean energy markets both in Russia international multi-stakeholder partnership between and abroad. Higher natural gas demand means improved industry and non-industry organizations with a focus on financial performance for the Company, driven by priority areas for action along the natural gas value chain. expanding opportunities to develop new LNG projects. The Company has joined international oil and gas industry
3. Details are available in the Environmental Performance and Protection section, p. 90. 4. The GHG Intensity ratio is calculated by dividing the total GHG combustion emissions from the total hydrocarbon production into the 1. IEA’s World Energy Outlook 2019. hydrocarbon production volumes (in boe). 2. IEA, The Role of Gas in Today’s Energy Transitions. 5. Details are available in the Environmental Performance and Protection section, p. 99.
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Transition risks Physical risks
Strategic risk Technology risk Chronic risk Acute risk
Current long-term forecasts envision a stable growth in Loss of market position due to the development of A gradual change in climate and weather conditions may Risks of lightning strikes, hurricanes, floods, earthquakes, natural gas consumption, assuming coal and petroleum innovative energy-efficient technologies involving affect the Company’s operations. NOVATEK assesses and other natural disasters are considered at the project products as energy sources are partly replaced by natural zero GHG emissions and renewables with the ensuing and considers these risks and the implications of climate design, construction and operation stages at least once gas. A significant portion of current power generation is changes in demand for hydrocarbons. At the same time, change at project design, construction and operation every two years when identifying and assessing the risks based on natural gas, and such countries as China and investments in new low-carbon technologies also pose stages as its core production assets are located in the (surveying) related to NOVATEK’s core production assets. India, for example, are moving away from burning coal with some risks should they prove ineffective. sensitive subarctic environment of Russia’s Far Northern To identify and evaluate risks, NOVATEK engages an expert high environmental pollution to natural gas and increasing permafrost region. organization using maps of natural hazards and natural the share of gas-fired power generation. At the same time, Legislative/regulatory risk peril datasets from Munich Re reinsurance company, lower speed of the global economy’s transition towards The permafrost conditions of the fields are vulnerable as well as Russia’s construction standards (SNiP, GOST, the cleaner types of fuel is a risk to global gas demand. Legislative and regulatory risks are associated with to industrial impacts. Field development plans provide and RUE). This physical risk can be acute primarily the adoption of new regulations on business activities for relevant actions to prevent thermal impact of the due to the increasing frequency of extreme weather Should the governments reconsider their clean energy in the Arctic and GHG emissions, as well as with the facilities on deep-frozen soil (including cryological phenomena, such as hurricanes, storms, strong winds, programs or cut respective subsidies or should generation requirements for climate change risk disclosures to monitoring and thermal protection of permafrost soils floods, and lightning strikes. Over time, it is planned to capacity upgrades slow down or other significant regulators and stock exchanges. for pile foundations). pay more attention to monitoring such extreme weather changes in the economic or geopolitical situation occur, phenomena. the demand for natural gas may weaken, while its Reputational risk Higher global average temperatures may lead to more growth will be significantly slower. As a result, lower than frequent forest fires, with smoke and fire affecting expected prices for hydrocarbons may have a negative Various stakeholder groups and the wider public are nearby industrial facilities. impact on the Company’s revenue, as well as on its ability becoming increasingly aware of the Company’s role in to develop new ambitious LNG projects. the context of climate change and the energy transition to low-carbon energy sources. Reputational risks may Carbon price therefore arise if the Environmental and Climate Change targets are not achieved or fall short of stakeholder Carbon control systems can be set up as climate policy expectations. The Company recognizes the importance instruments at the national and regional levels, which of building and enhancing a positive profile and improving can impose carbon quotas or carbon taxes on producers public perception of the Company’s climate and (cross-border adjustment mechanisms), which, in turn, can environmental strategy. The Company contributes to give rise to significant additional costs for the Company. global climate action while facilitating the transition to a low-carbon future and working to maintain regular Market risk contact with stakeholders and provide timely and balanced information on the Company’s Environmental Possible decline in gas demand in the domestic (Russian) and Climate Change targets, as well as on its progress market due to changes in seasonal climate cycles. towards achieving them.
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Consideration of climate change scenarios % Climate Protection Initiatives % The Company considers climate change scenarios while designing the large-scale LNG projects Yamal LNG and Arctic LNG 2. The standard method to identify the climatic conditions under which LNG projects can be designed or 96.2 19 to identify the realistic in-use climatic conditions for the APG utilization program equipment is the consideration of historical data as part APG utilization rate in 2020 Reduction of direct GHG emissions of engineering and hydrometeorological surveys. The Company makes every effort to utilize associated petroleum gas. In 2020, we implemented a technology Global warming can potentially reduce ice thickness and for deep APG injection at the Yarudeyskoye field. the ice cover duration, which would lower overall logistics The potential reduction in annual LNG production under This allowed to cut our GHG emissions by 1.2 mmt A conceptual evaluation of a prospective project for the risks and the costs of LNG transportation. this scenario is below 1%. of CO2 equivalent – a major environmental benefit large-scale production of low-carbon (“blue”) ammonia achieved through re-injection of over 357 mmcm in the from natural gas with carbon dioxide capture and For future LNG projects, the risk of climate warming will be The design capacity of the project’s three liquefaction Yarudeyskoye field formations in 2020. utilization is ongoing in 2021. considered on a project-specific basis. trains is 16.5 mmt of LNG per year. The actually annual capacity of the three trains is more than 18.2 mmtpa, As a result, NOVATEK’s APG utilization rate achieved Also in 2021, NOVATEK will continue developing a medium- Yamal LNG project which is 10% higher than the design capacity, which has 96.17% in 2020. This is a substantial improvement and long-term alternative energy strategy, with goals been achieved through an increase in actual equipment compared to the previous year. and objectives definition and project priority ranking and Yamal LNG design solutions capture the probability reliability and improved performance during the cold selection for implementation. of climate warming and the resulting risks of building season (from October to May, inclusive). This capacity The Company aims to increase APG utilization rate to 99% or structure foundation movements. The thermal margin is many times greater than the potential risk by 2030. calculations for foundations included: of lost productivity under potential climate change scenarios. • data from global warming studies on the Yamal Carbon capture, utilization and storage Peninsula, e.g. the air temperature rise between 1995 In addition, usually the trains are shut down for scheduled in LNG production and 2018 was 0.7 °C (+ 0.028 °C per year); maintenance in summer, which further reduces the impact Cogeneration technology at gas turbine of climate change. power plants NOVATEK is developing a concept for carbon dioxide • research data on the forecast increase in the capture, transportation and injection during LNG air temperature by 1.4 °C between 1995 and 2050 Arctic LNG 2 project Nearly all of the Group’s production facilities use the production. This is impeded by the fact that there are (+0.025 °C per year). cogeneration (heat recovery) technology. Thermal no governmental regulations for these activities at The Arctic LNG 2 project involves the construction efficiency is as high as 85–90%, reducing combustion present. The Company contributes to the development Air temperature is one of the key drivers affecting of the Utrenniy terminal and three LNG and stable product emissions, in particular GHG emissions. In of a licensing procedure for the underground storage performance of LNG plant liquefaction trains. The gas condensate production trains on gravity-based 2020, GHG emissions were reduced by 101,656 tons of of carbon dioxide and relevant amendments to the Law assumed maximum ambient air temperature of +15 °C is structures (GBS) resting in their design position on the CO2 equivalent through cogeneration technologies. No. 2395-1 “On Subsoil” and the Federal Law No. 89-FZ “On used when designing air coolers, which have a significant seabed, and the potential rise of soil temperatures does Industrial and Consumer Waste” as well as applicable rules impact on performance. The choice of this temperature not pose a risk to the integrity of these facilities. and regulations. is determined by the optimal CAPEX/operational performance ratio. The potential climate change risks for GBS were identified and analyzed within the HAZID1 and ENVID2 procedures, Hydrogen production as a promising According to meteorological studies, the maximum with their results reflected in the design. renewable ambient air temperature at the Yamal LNG project is Use of renewables assumed to be +30 °С while the maximum temperature Our thermal engineering calculations for onshore building In 2020, NOVATEK began organizational changes for of +29.7 °С throughout the project’s implementation and or structure foundations reflect the expected increase in hydrogen production, including creation of a separate The Company uses environmentally friendly renewable operation period was recorded in July 2016. the average air temperature of 0.043 °C per year, which business unit (the Department for Alternative Energy & energy sources: solar panels and wind turbines. The total completely covers global warming assumptions3. Offshore Technologies, which includes the Alternative number of such renewable energy systems in 2020 was Actual observations since 2014 reveal that the average Energy and Hydrogen Development Division) whose tasks 148, reducing indirect emissions in power generation. daily temperature reaches +15 °C for 8.9 days per year Although the natural gas liquefaction solutions used include conceptual development and preparation for Renewable sources of energy are used to supply power to on average, or 2.4% of the total time. The average daily at Arctic LNG 2 differ from technologies used at Yamal hydrogen production project implementation both within telemechanics units at trunk pipelines and well pads at gas temperature reaches +14 °C for 13.7 days per year on LNG, an additional capacity margin is also projected of existing projects (such as Yamal LNG) and new ones. condensate fields. average; accordingly, in the 1 °C scenario, the number of for the former project during the cold season. The days when production would be constrained by air cooling actual capacity margin of the liquefaction trains will be In 2020, we completed a conceptual evaluation of In 2021, we plan to launch a wind measurement program capabilities is estimated to increase by 4.8 days, or 1.3%. determined during operation of the project. prospective projects for low-carbon (“blue”) hydrogen near the existing Yamal LNG plant on the Yamal Peninsula production from natural gas with carbon dioxide capture in preparation for a wind farm project that will use the and utilization and the conversion of some of the existing generated electricity to reduce the carbon footprint of the gas turbines to a methane-hydrogen mix, as well as other LNG produced at Yamal LNG. projects for hydrogen production by electrolysis using renewable energy.
1. Hazard Identification is one of the principal methods for systematic and structured assessment of HSE risks at various project stages and during its operation 2. Environmental Impact Identification (ENVID) is a powerful method for analyzing the environmental and social impacts and risks at various stages of designing or during the operation of existing industrial facilities. 3. Pavlov A.V., Monitoring kriolitozony (Cryolithozone Monitoring). – Moscow: Russian Academy of Sciences, 2008.
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Fueling station network development and transition to NGV fuel LNG transportation by sea Decarbonization partnerships
NOVATEK’s strategy as a natural gas and LNG producer includes wind generation projects in developing Yamalmax LNG tankers sailing on the Northern Sea Route NOVATEK is seeking partnerships to reduce its carbon calls for active development of the natural gas vehicle countries. The emission compensation projects were for the Yamal LNG project have Wartsila 12V50DF and footprint. (NGV) fuel market natural both in Russia and abroad. This certified in accordance with the international VCS Wartsila 9L50DF engines with a total power of 39.6 MW market segment represents significant growth potential, (Verified Carbon Standard). (Christophe de Margerie, the lead ship in the series with a To that end, in 2020, NOVATEK concluded an agreement given increasingly stringent environmental standards. capacity of 172,845 cubic meters of LNG). These engines with Siemens Energy on strategic partnership for LNG Compared to diesel, LNG produces much less nitrogen On the domestic market, NOVATEK is implementing a can run on both heavy marine fuel and boil-off gas (gas production decarbonization. The companies will work oxides and carbon dioxide emissions, with almost no project for the sale of LNG as a motor fuel. In August from an LNG recovery system with Cryostar compressors). together to develop and launch high-tech solutions to particulate emissions. 2020, the first small-scale 40 mtpa LNG plant was Use of LNG as marine fuel reduces air emissions of produce LNG, electricity, hydrogen and other products launched in Magnitogorsk (Chelyabinsk Region). combustion products, including greenhouse gases, from in order to support sustainable development and meet As part of NOVATEK’s long-term strategy, the Company engines compared to heavy marine fuels (fuel oil). the companies’ goals of reducing their carbon footprint plans to build a network of LNG fueling stations in By the end of 2020, NOVATEK had a total of 11 LNG retail and improving environmental efficiency. As part of this Europe to provide freight transport with clean fuel at stations (of which 9 were built during the year) in the Ural, The Arc7 ice-class LNG tankers can sail on the Northern agreement, the companies have agreed to launch a key transport connecting points between Germany and Northwestern, Central and Volga Federal Districts. In 2020, Sea Route westward without any icebreaker support year- project to replace natural gas used as fuel in power Poland. As at the end of January 2021, the Company fueling station sales increased from 70 tons per month in round and eastward with icebreakers assistance during generation and LNG with carbon-neutral hydrogen. owned a network of 9 LNG fueling stations as well as 21 January 2020 to 540 tons per month in December 2020, months with difficult ice conditions. The carriers are regasification units on the European market. with the number of LNG-fueled vehicles up from 30 to 500, powered by low-carbon gas generated by LNG cargo boil- In early 2021, the Company also signed a memorandum on including semi-trailer tractors, urban passenger transport off. The use of LNG carriers not only curbs greenhouse decarbonization with the NLMK Group, a major consumer In December 2020, Novatek Green Energy1 opened its and haul trucks. The Company has approved the Small- gas emissions, but also poses no risk of significant of NOVATEK products. The memorandum confirms the first carbon-neutral2 LNG fueling station in Rostock, Scale LNG Investment Project to build 7 small-scale environmental disaster due to petroleum product spills. companies’ intention to cooperate in carbon dioxide Germany. The carbon footprint of the LNG sold LNG plants. By 2026, LNG as a NGV fuel is planned to be capture, utilization and storage, hydrogen production to consumers, including its final consumption, is sold from 66 LNG fueling stations. Fueling infrastructure Furthermore, the use of the Northern Sea Route reduces technology development and hydrogen fuel usage, as compensated through carbon offsetting. A carefully development aims to cover key Russia’s federal highways the Company’s shipping times and costs, which is crucial well as development of new products for low-carbon selected portfolio of emission compensation projects M-10, M-11, M-4, M-5, M-7, and the Central Circular Road. for the development of the fields on the Yamal and technologies. Gydan Peninsulas. For example, shipping times to Asia are accelerated by over 40% which also contributes to In early 2021, NOVATEK and Uniper signed a Memorandum reducing the climate footprint of product transportation. of Understanding to explore and assess capabilities of building a hydrogen supply chain. The companies intend to develop an integrated chain of hydrogen production, transportation, and supply, including to Uniper power plants in Russia and Western Europe. We also consider the idea of supplying “blue” hydrogen produced from natural
gas with CO2 capture and storage, as well as “green” hydrogen produced with renewables.
Also in 2021, a strategic cooperation agreement on
reducing CO2 emissions was concluded between NOVATEK and Nuovo Pignone, a subsidiary of Baker Hughes, to cooperate in the development of electric and gas- turbine solutions for gas production and liquefaction and reduction of carbon dioxide emissions.
1. Novatek Polska prior to 3 February 2020. 2. The term “carbon-neutral” means that Novatek Green Energy compensated for the amount of greenhouse gas emissions from the following scopes: upstream transport of LNG from the supply source at LNG terminals in Europe to the fueling station, fueling station operations and the final consumption of LNG by end-customers.
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To prevent possible adverse consequences of changes in of piles is unprecedented in the history of completed to the facility operation, better thermal insulation of permafrost condition, appropriate measures are taken at projects and far above what is required by Russian buildings and structures, adding heat pipes, snow cover the Company’s fields to make sure subsoil under buildings technical standards as a margin of safety. “management” (for example, snow removal in early winter and structures remains frozen. to increase frost depth). Permafrost Aside from pile foundations, we use sand fill. Permafrost The most common technology for keeping soils frozen on the Yamal Peninsula is up to 400 meters deep, while the Engineering and design of each NOVATEK’s facility includes NOVATEK’s main production facilities are located in is using of tubular liquid or vapor-liquid devices called top 1.5–2 meters of soil are an “active layer”, which thaws stability testing by the Company’s contractors for various Russia’s Far North, an Arctic zone with harsh climate and heat pipes. These are placed in the subsoil in vertical in summer and freezes again in winter. Sand fill stops climate warming scenarios. For example, the Yamal LNG permafrost environment (cryolithozone). The Company wells (in case of pile foundations and vented crawl seasonal thawing and freezing under the fill, and heat buildings and structures were designed with allowance evaluates implications for its operations, conducts space) or horizontally/obliquely (in case of structures pipes prevent thawed soil layer expansion, thus increasing for potential air temperature rise scenarios (by 4 °C geotechnical and environmental monitoring, develops a with slab-on-grade floors) to minimize thermal influence structural stability and reliability. compared to the current levels) and the associated GHG emissions reporting system, and uses innovative of the structure. A conventional heat pipe consists of warming of the soil layers (by 2 °C), therefore, underlying technologies to reduce emissions. NOVATEK made a two principal elements: an underground evaporator Permafrost condition is controlled through geotechnical soil design and preparation allows potential warming. In voluntary commitment to regulate its GHG emissions and and an above-ground condenser. Various liquids or monitoring by measuring soil temperatures down to addition, permafrost sensitivity analysis was conducted permafrost footprint and make every effort to reduce gases can be used as coolants. In winter, the coolant the pile tip depth during construction and operation of for scenarios of potential rise in average air temperature adverse impacts on the atmosphere. (refrigerant) condenses, resulting in “transfer of cold” structures. Temperatures are measured by temperature by 2 °C and 4 °C and soil temperature by 1 °C and from the atmosphere to the ground by gravity. Then, in sensor strings in special thermometric wells directly 2 °C, respectively (for the period from 1999 to 2019). NOVATEK follows the precautionary principle in all the heat exchange process, the coolant evaporates, beneath the structures. A temperature sensor string is Measurements at special background sites and weather operations. Based on environmental risk assessment rising to the condenser, and the cycle repeats. As a a chain of digital temperature transducers connected in stations indicate that the situation is currently developing across the entire process chain, the Company takes result, a significant decrease in the temperature of series by a flexible cable. Yamal LNG performs this type according to the most favorable scenario. preventative measures and incorporates potential the ground is observed in winter. In summer, when the of monitoring in over 2,500 wells under all structures. The threat assessment into its decision-making process. ambient temperature rises, the condensation process largest of them, such as LNG tanks, have more than 20 A geocryological map and a construction complexity map Environmental and social requirements of international stops, and that causes the stoppage of the coolant temperature sensor strings under each tank. All strings were created for Yamal LNG and Arctic LNG 2 to identify lenders, such as the Equator Principles and the standards circulation inside the heat pipe. The process stabilizes soil are regularly inspected, with readings entered into special areas with higher construction risks. of the International Finance Corporation, have already temperature and improves its bearing capacity within the tables (geo-engineering certificates of facilities), enabling been adopted and will be diligently followed within area affected by the heat pipe. identification of any deviations. There are several ways Thermal insulation of strong heat sources offers NOVATEK. Prior to launching projects we conduct to respond to geo-technical monitoring data, including additional protection. In particular, wide use of PENOPLEX environmental and social impact assessments1. Depending on geotechnical environment and foundation temperature changes. Generalized thermometry data XPS at Yamal LNG significantly reduced thermal impact design, different options of heat pipe laying can be used: are used to build heat maps (for areal facilities) and heat from such sources as the LNG plant flare, buried tanks The Yamal LNG and Arctic LNG 2 projects are operated vertical, horizontal, inclined or a combination thereof. profiles (for linear facilities), i.e. fields and sections of soil and others, as evidenced by temperature measurement in extremely harsh conditions of the Arctic coast where temperature at a given depth across the entire facility as data. the annual temperature range is lower than in continental One of the ways to significantly reduce impacts on isolines superimposed on the facility plot plan. The images Siberia: winter temperatures range from –20 °C to –35 °C permafrost is to build structures on pile foundations are used to identify high temperature zones as well as the and summer temperatures range from +10 °C to +20 °C. with vented crawl space. The Yamal LNG project installed cause of temperature rise (a heat source or conditions Air temperature rises above zero during only four months more than 38,000 piles to eliminate any risks of thawing disturbing natural soil temperature distribution). Response of the year, from June to September. and adverse environmental consequences. This number depends on the identified cause and can include changes
1. Environmental and social impact assessment (ESIA) documentation is available on Yamal LNG and Arctic LNG 2 project official sites.
86 87 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
NOVATEK’s second large-capacity LNG project, Arctic LNG Geotechnical monitoring shows that permafrost thawing confirmed presence of permafrost. The facilities are 2, will be the first LNG plant in Russia and worldwide on risk is currently under control. also provided with means to monitor soil and facility a gravity-base structure (GBS), where new technologies temperatures and movements (geotechnical monitoring). will significantly reduce the project capital intensity and An indicator of the current condition of foundations Geocryological risk assessment Project implementation (both during surveys and minimize its environmental footprint. The GBS platform is is foundation deformations monitored on a regular operation), special attention is paid to identification not supported by piles as it is rests on the seabed close basis. Deformation measurements are also entered The main risk to integrity of buildings and infrastructure and prediction of such cryolithozone hazards as to the shoreline. By using the GBS platform, the Company into the geotechnical certificates of structures. is associated with potential destabilizing of the frozen frost mounds, gas hydrates and cryopegs. Advanced minimizes impact on permafrost. Furthermore, Arctic LNG Should any changes be identified, they are evaluated soil foundations. Since all facilities are designed to engineering technologies, thermal calculations and 2 is designed for the worst-case scenarios of climate against design tolerances, deformation trends are minimize their impact on permafrost and use temperature subsequent verification through geotechnical monitoring change. determined, the data are compared with thermometry stabilization and geotechnical monitoring, the likelihood enable high-quality assessment of permafrost and and visual inspection data to make a decision on of this risk is evaluated as medium. This evaluation is facility condition. In addition, an industrial (local) Field infrastructure development plans provide for further action. confirmed at least four times a year based on data on environmental monitoring program includes identification prevention of thermal impact from field facilities the current condition of facilities. In addition, Guidelines of active cryogenic process – frost cracking, cryokarst on permafrost. NOVATEK uses regular geotechnical Monitoring of long linear facilities additionally includes for the Evaluation and Prevention of Technical and and thermoerosion, frost have and other forms of monitoring of its fields to manage this risk, adapt to it route surveys with the collection of data on the facility Geocryological Risks on the South-Tambeyskoye Field were permafrost evolution and degradation. In 2020, these and prevent potential adverse consequences as well as to and natural and anthropogenic conditions along its entire developed to inform employees designing, building and studies covered several license areas in the Yamal and monitor soil bearing capacity and permafrost conditions length. operating facilities on the field of measures to prevent Tazovsky Districts of the Yamal-Nenets Autonomous and temperature. these risks. Region. Combined with the geotechnical monitoring It should also be noted that projects are run in close results, the studies provide an objective representation Geotechnical monitoring consists in measuring soil cooperation with the leading experts in permafrost, As the most of the Company’s production facilities of permafrost conditions in the Company’s regions of temperature under all facilities (both production and non- such as: Oil and Gas Research Institute of the Russian are in the Russian Arctic, prediction and monitoring of operation. production) – from dormitories and canteens to tanks and Academy of Sciences, Lomonosov Moscow State permafrost condition and cryogenic processes is an compressors – at specified intervals. Monitoring data and University, Gersevanov Research Institute of Bases important consideration during pre-project surveying, Monitoring of geological environments as well as buildings identified causes (natural or anthropogenic) determine and Underground Structures, to name a few. The engineering and design, construction and operation and structures during construction and operation in the measures to be taken to prevent soil thawing. Such cooperation includes expeditions, technical calculations, of buildings and structures. Special measures are cryolithozone by NOVATEK shows that permafrost thawing prevention measures include soil temperature stabilization geocryological forecasting, and evaluation of current implemented to maintain soil stability and bearing and degradation risk is currently low and has no significant and use of piles in construction. parameters of natural-anthropogenic interaction. capacity both on areal and linear facilities on sites with impact on the Company’s operations.
Geotechnical monitoring at Yamal LNG: Geotechnical monitoring at Arctic LNG 21:
No. Parameter Annual numbers No. Parameter Annual numbers
1 Soil temperature monitoring under structures Over 5,500 measurements 1 Soil temperature monitoring under structures Over 4,500 measurements
2 Structural deformation monitoring Over 35,500 measurements 2 Structural deformation monitoring Over 27,000 measurements
3 Control of temperature stabilization system operation Installation of more than 22,000 heat pipes 3 Control of temperature stabilization system operation Installation of more than 600 thermal stabilizers
4 Use of space radio interferometry imaging 1 space image (for the entire territory) 4 Using of space images 1 space image (for the entire territory) 15 radar images 5 Visual inspections At least two inspections of each facility 5 Visual inspections At least two inspections of each facility 6 Monitoring of water content in soil and natural processes At least twice, including by space imaging 6 Monitoring of water content in soil and natural processes At least twice, including by space imaging 7 Measurements of snow cover Over 500 measurements 7 Measurements of snow cover Over 2,000 measurements
1. Data for Arctic LNG 2 are given at the time of construction.
88 89 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
In August 2020, NOVATEK’s Board of Environmental Directors approved the environmental and climate change targets for Performance the period up to 2030 aimed at atmospheric emissions reduction including GHG emissions as well as and Protection at the increase of share of waste directed to utilization and disposal.
12.4 RR bln 2.4 RR bln 41 % Will be allocated for the implementation Environmental expenses Reduction of waste of measures towards Environmental and in 2020 generation Climate Change targets in 2021–2023
90 91 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Environmental Vision By 2030, we plan to obtain 100% certification of all In 2020, NOVATEK subsidiaries and joint ventures held a of the EIA results moved online, leveraging various remote subsidiaries and joint ventures for compliance with total of 24 public consultations to discuss the results collaboration tools, including video conferencing. The The Company’s environmental protection efforts are internationally recognized environmental management of environmental impact assessments (EIAs) for future high technical level of workplace setups of Company focused on preventing and reducing the potential requirements. projects in the Nadymsky, Yamalsky, Tazovsky and Purovsky specialists and municipal administrations organizing these negative environmental impact of NOVATEK’s facilities. Districts of the Yamal-Nenets Autonomous Region, and meetings enabled us to safely run all statutory procedures 102‑11 in the Kingiseppsky District of the Leningrad Region. In for disclosing and discussing EIA documentation and The Company’s key environmental protection and In its environmental protection efforts, the Company particular, communities discussed projects for surveys, considering stakeholder feedback and suggestions related sustainability initiatives include: applies the Precautionary Principle or Precautionary brownfield expansion and field facility construction, as to new projects. Approach – one of the fundamental principles of well as overhaul of processing facilities. Participants in • effective management of emissions and waste; international environmental law set forth in the Preamble the public consultations had the opportunity to read the The Company’s hydrocarbon production, transportation, to the UN Convention on Biological Diversity, which EIA documents and get answers to their questions and processing, storage and shipment activities at all stages – • energy saving, energy efficiency, use of alternative states that lack of full scientific certainty should not express their own views about the proposed activity, from project initiation to completion – are accompanied energy sources; be used as a reason for postponing measures to avoid including by voting. All of these projects secured the by comprehensive environmental support aimed at or minimize a threat of significant reduction or loss of public endorsement as shown by the majority voting of identification, assessment and mitigation of environmental • ongoing environmental monitoring and environmental biological diversity. For NOVATEK, following this principle participants. risks. The elements of this support include engineering and operational control; in real-life practice means that based on its assessment environmental surveys, environmental impact assessment, of environmental risks across the entire production COVID-19 restrictions in 2020 had only a minimal impact on design of environmental measures, environmental review, • sustainable use and protection of water resources, chain, the Company takes preventive measures and the effectiveness of environmental support for the Group environmental monitoring and control, and various formats maintaining a water disposal system; incorporates potential threats into decision-making. projects. Thus, rather than arranging traditional meetings of interaction with supervising authorities and other Specifically, since most of the Company’s assets with local communities and other stakeholders, discussions stakeholders during environmental management. • compensation of damage to aquatic bioresources; are concentrated in sensitive permafrost areas, the precautionary approach calls for the identification, • protection of biodiversity across the Company’s assessment, prediction, and accounting for engineering footprint; and environmental risks from global climate change and NOVATEK’s Strategic Targets in Environmental Protection permafrost degradation. • disturbed area reclamation; With regard to biodiversity components, the In 2020, the Company’s Board of Directors adopted • Methane emissions per unit of production exceeded • use of best available technology to ensure precautionary approach is implemented through Environmental and Climate Change targets for the period the 2020 estimate by 5% due to increased methane environmental safety; and the Company’s integrated environmental monitoring up to 2030. The year 2019 was adopted as the baseline emissions as a result of production capacity growth. programs, which have a wider geography and increased for the development of the targets. To improve the The North-Russkoye and East-Tazovskoye fields came • training and education of the Company’s employees thematic scope, and actively involve research, engineering accuracy of measuring the achievement of long-term onstream in 2020 as additional sources of emissions. and contractors on environmental protection and and non-governmental organizations. Environmental and Climate Change targets, additional safety. annual environmental and climate-related annual To achieve our targets, in 2020, we launched a project to In addition, the precautionary approach expands the estimates were introduced, considering the Company’s inject APG for pressure maintenance at the Yarudeyskoye NOVATEK’s Health, Safety and Environment Policy is the requirements for assessing the impact of intended potential growth. NOVATEK plans to allocate RR 12.4 bln for field and implemented instrumental verifications of key document governing the Company’s environmental activities on the natural and social environment. A number the implementation of measures towards Environmental pollutant emissions at NOVATEK-Ust-Luga. activities. of global standards require repeated assessments to and Climate Change targets in 2021–2023. be prepared where the impacts of third-party activities In 2021, the following measures are planned to achieve the The Company’s HSE Department is responsible for may compound those of the main project (so-called In 2020, the Company consistently focused on working targets: environmental protection and sustainable management of cumulative impacts). towards interim milestones for its environmental targets: natural resources. • commissioning of additional capacity for low-pressure The effectiveness of the environmental measures • By increasing APG injection for pressure maintenance, APG compression; NOVATEK subsidiaries and joint ventures use the implemented by the Company is monitored by Russian we reduced GHG emissions in 2020, as indicated by Integrated HSE Management System compliant with and, for some projects, international organizations. GHG emissions per unit of production in the upstream • phasing out burning in horizontal gas flaring systems; ISO 14001:2015 as regards environmental management. segment. We achieved out target and even exceeded it As at end of 2020, 9 out of 23 (39%) Group subsidiaries The Company engages in extensive cooperation by 26% vs. the 2020 estimate. The Group’s operations • reduction of air emissions during gas- and gas- engaged in hydrocarbon production, transportation and with research and non-governmental environmental use cogeneration technology, almost doubling fuel condensate well tests; processing1 were certified to ISO 14001:2015. organizations such as the World Wildlife Fund for Nature efficiency to achieve lower fuel gas consumption and (WWF), Marine Mammal Council (Russian Federation), a significant reduction in GHG emissions. In 2020, GHG • installation of flares for sootless flaring; and
In 2020, two companies, Yargeo and Arctic LNG 2, started and V.I. Vernadsky Non-Governmental Environmental emissions were reduced by 101,656 tons of CO2 equivalent the deployment of an ISO 14001:2015-compliant integrated Foundation. In addition, prior to the start of new through cogeneration technologies. • switching to a new methodology for calculating management system – a diagnostic audit was conducted, construction or modernization of existing facilities and flare emissions that factors in air injection into the and a number of documents were developed (including as part of state environmental reviews, NOVATEK holds • By transitioning to direct measurements of pollutants combustion zone. Integrated Management System Guidelines, Hazards, Risks public consultations with local communities in the regions at the emission sources the target for air pollutant and Environmental Aspects Register). In addition, relevant of its operations. As an example, environmental and social emissions per unit of production was achieved (exceeding In 2020, the Company’s total environmental costs employees completed the training programs, Internal impact assessment, disclosure and discussion of its the 2020 estimate by 4%). amounted to RR 2.4 bln (up 67% year-on-year). The largest Audit of an Integrated Management System under ISO results with stakeholders, and obtaining approvals from increase was in the costs of land and soil protection 14001 (over 20 employees) and Integrated Management competent authorities – all are key to implementing the • Some estimates, though, were not achieved in 2020: (4.3 times), followed by water protection (2.5 times) and System Implementation (about 60 employees). Company’s Yamal LNG and Arctic LNG 2 projects. in particular, the share of waste directed to utilization biodiversity conservation (1.7 times). and disposal were below the 2020 estimate (missed by 8%). This was due to delayed arrivals of contractors to
1. PAO NOVATEK, NOVATEK-Yurkharovneftegas, NOVATEK-Purovsky ZPK, NOVATEK-Transervice, Yamal LNG, NOVATEK-Ust-Luga, Arcticgas, facilities amid COVID-19 restrictions and subsequent Cryogas-Vysotsk and NOVATEK-Tarkosaleneftegas. temporary suspension of waste recycling.
92 93 0.4% 0.143 1.8% Stationary combustion, 0.128 0.128 including flaring Fugitive emissions Other
2018 2019 2020 97.8%
11,71; 9,96; 0,249; 0,102; 99%; 90%
0.4% 0.143 1.8% Stationary combustion, 0.128 0.128 including flaring Fugitive emissions Other
2018 2019 2020 97.8% -6% -4% 13.78 14.44 12.58 11.75 10.44 8.65
2019 2020 2020 Target 2019 2020 2020 Target Estimate Actual 11,71;up to9,96; 2030 0,249; 0,102; Estimate Actual up to 2030 99%; 90%
THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020 -5% -20%
0.263 0.248 0.244 NOVATEK’s Environmental and Climate Change targets1 Environmental charges in 2018–2020, RR mln Due to COVID-19 restrictions, training and testing were 0.128 0.149 0.143 organized remotely, enabled by the high technical level Reduce GHG emissions per unit of production Reduce methane emissions per unit 14.1 of workplace setups. in upstream segment by 6% of production in the production, processing 2019 2020 2020 Target 2019 2020 2020 Target Estimate Actual up to 2030 and LNG segmentsEstimate by 4% Actual up to 2030 As in previous years, managers at various levels of the organization and young specialists involved in -6% -4% 13.78 14.44 environmental support for the Group’s projects also 12.58 11.75 6.7 10.44 5.9 took advanced training programs. 8.65 up to 99% up to 90% The need for additional health protection and healthcare support measures in 2020 necessitated 95%* 96% 96.2% 2019 2020 2020 Target 2019 2020 2020 Target upskilling for a number of medical waste management 75% 77% 69% Estimate Actual up to 2030 Estimate Actual up to 2030 professionals. 2018 2019 2020
Reduce GHG emissions per ton of LNG Reduce air pollutant emissions per unit In addition, integrated management (including produced by 5% of production by 20% environmental management) system implementation 2019 2020 2020 Target 2019 2020 2020 Target Estimate Actual up to 2030 Estimate Actual up to 2030 In 2020, the Company’s total environmental costs by subsidiaries and joint ventures called for additional -5% -20% amounted to RR 2.4 bln (up 67% year-on-year). The largest training efforts: in 2020, more than 60 specialists increase was in the costs of land and soil protection underwent training and certification in this area. 0.263 0.248 0.244 (4.3 times), followed by water protection (2.5 times) and
0.128 0.149 0.143 biodiversity conservation (1.7 times). 413‑1 The entire Yamal-Nenets Autonomous Region is included 14.1 In 2020, NOVATEK paid RR 5.9 mln in environmental charges, in the list of areas where indigenous peoples of the Far 3 2019 2020 2020 Target 2019 2020 2020 Target down 58% year-on-year and less than 0.25% of total North traditionally live and engage in economic activity . Estimate Actual up to 2030 Estimate Actual up to 2030 environmental costs. However, specially protected areas of traditional use of natural resources by the indigenous peoples of the Increase the APG utilization rate to 99% Increase the share of waste directed The biggest reduction in environmental charges was Far North4 have not been established so far within the 6.7 to utilization and disposal to 90% achieved through the rollout of a technology5.9 for deep boundaries of the autonomous region. reinjection of APG, which, in turn, led to a decrease in gas up to 99% up to 90% flaring, as well as through the reduction of landfill waste. The Company conducts annual environmental impact 95%* 96% 96.2% assessment of land use within areas affected by its 75% 77% 69% operations via its scheduled environmental monitoring Environmental2018 protection2019 training2020 programs.
In 2020, more than 150 NOVATEK specialists successfully 2019 2020 2020 Target 2019 2020 2020 Target completed a range of advanced training programs in Estimate Actual up to 2030 Estimate Actual up to 2030 environmental protection. * Legal requirement in Russia.
NOVATEK’s environmental costs in 20202 NOVATEK’s employee training in environmental protection in 2018-2020
Environmental protection and sustainable nature management Costs, RR mln Subjects Number of people trained in environmental management Atmospheric air protection and climate change prevention 38.3 2018 2019 2020 Water protection 1,382.5 Environmental safety for managers and general business management specialists 96 27 34 Environment protection from production and consumer waste, hazardous waste treatment 320.3 Environmental safety and hazardous waste handling 89 67 24 Land and soil protection 295.3 Environmental safety for managers and specialists of environmental departments and 28 2 8 Subsoil protection (for production facilities) 7.8 environmental control systems Protection of flora, fauna and habitats, biodiversity preservation 180.7 Professional training of persons authorized to handle Class 1–4 hazardous waste 26 29 35 Environmental management 17.0 Other environmental programs, including environmental management 18 66 95 Environmental monitoring 134.1 TOTAL 257 191 196 Environmental charges 5.9
Other costs 0.1 3. Citing Russian Government Decree No. 631-r “On Approval of the List of Places of Traditional Residence and Traditional Economic TOTAL 2,382.0 Activity of the Indigenous Peoples of the Russian Federation and the List of Types of Traditional Economic Activities of the Indigenous Peoples of the Russian Federation” dated 8 May 2009 (as amended on 11 February 2021). 4. Citing Federal Law of the Russian Federation No. 49-FZ “On the Territories of Traditional Use of Natural Resources by Indigenous Ethnic Groups of the North, Siberia and the Far East of the Russian Federation” dated 7 May 2001 (as amended on 8 December 2020), as 1. GHG emissions reduction targets, including methane emissions, have been set as per Scope 1. well as Law of the Yamal-Nenets Autonomous Region No. 52-ZAO “On Regional Significance Territories of Traditional Use of Natural 2. The calculation is based on the Company’s proportional share in joint ventures, for more details see p. 99. Resources in the Yamal-Nenets Autonomous Region” dated 5 May 2010 (as amended on 23 December 2019).
94 95 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Environmental Monitoring sections of 38 fields and license areas were satisfactory Number of audits by supervisory authorities with respect to environment protection and sustainable management and Control with a low level of environmental pollution. Integrated of natural resources in 2018–2020 assessment was performed using a set of five indicators: Supervisory authority 2018 2019 2020 Annual environmental monitoring is a key tool for environmental assessment at production sites, • total snow cover pollution index; Russian regional public prosecution offices 43 30 44 identification of challenges, and timely adjustment of Federal Service for Supervision of Natural Resources 22 17 57 the environmental policy. The Company runs its annual • surface water pollution index; environmental monitoring program across its production Russian regional executive authorities 16 12 4 footprint. The monitoring is carried out by independent • bottom sediment characteristics in terms of petroleum environmental auditors (hiring qualified experts and products content; Municipal authorities 0 4 0 having relevant licenses) as per applicable programs and Federal Agency for Fishery 0 1 3 methodologies. • total soil pollution index; and
TOTAL 81 64 108 It involves examining the condition of environment • soil characteristics by the content of petroleum components, taking snow, soil, ground, surface/ground products. water and seabed sediment samples, checking the condition of the local flora, animals and microorganisms, In 2020, the Group spent RR 134 mln to arrange and run Energy Consumption The Company consumes electricity (17% purchased, 83% estimating air pollution, studying and recording signs of environmental monitoring in areas potentially impacted by and Efficiency4 own generation) and heat (own production, mostly using dangerous exogenous processes (including cryogenic) its projects2. secondary energy resources (heat from flue gases) and and hydrological phenomena. The status of fish stock fuel gas). and fodder resources in water areas is studied along with To reduce the negative impact on the environment, The rational use of resources is one of the key principles hydrological and hydrochemical parameters. Samples a multitier environmental operational control system of NOVATEK’s energy policy. The Company pays close In 2021, the following targets for energy efficiency and the are studied in certified laboratories. Based on the study is in place at the Company’s subsidiaries and joint attention to reducing the consumption of fuel and use of renewable sources of energy were adopted under results, the condition of the environment components is ventures. The majority of NOVATEK’s large production energy resources and improving the energy efficiency the UN’s priority SDG No. 7, Affordable and Clean Energy: evaluated as well as its dynamic pattern over the year. subsidiaries and joint ventures have a chemical laboratory of technological processes and equipment used, as well fully equipped for prompt operational analysis. The as to using modern highly efficient technologies when • expand the use of renewables for gas and condensate The visual part of the monitoring involves inspection and environmental operational control system feeds data to developing design solutions and technical requirements production facilities; photographing of the areas along cross-country routes. analyze and streamline our core processes. for equipment, especially under new investment projects. To run the environmental monitoring in the tundra zone, • use energy-efficient LNG production technologies to we use transport with low-pressure tires to preserve the In 2020, the Federal Service for Supervision of Natural The Company widely applies wellknown advanced technical increase the availability of LNG and reduce greenhouse fragile topsoil. Resources (Rosprirodnadzor), Federal Agency for solutions aimed at improving energy efficiency, including: gas emissions; and Fishery, Russian regional executive authorities and public The Company conducts integrated environmental prosecution offices held scheduled and ad-hoc audits at • frequency-controlled electric drives for pumping and • continuously improve energy efficiency of hydrocarbon assessments of its territories of operation to curb its major production NOVATEK subsidiaries and joint ventures compressor equipment; production and processing. environmental footprint and maintain local ecosystems in with respect to environment protection and sustainable a satisfactory condition. management of natural resources. • efficient automatically controlled electric lighting and 302‑4 electric heating systems; and Energy-saving initiatives implemented by NOVATEK in 2020 These assessments help identify the overall situation In 2020, 108 audits were held with respect to environment enabled an overall reduction in energy consumption by around polluting facilities on a fivethreshold scale: protection and sustainable management of natural • LED lighting installations, cogeneration technologies. 30,500 GJ due to an 8.4 mln kWh reduction in electricity resources: 53% were audits by the Federal Service for consumption, which accounted for 0.3% of the total • 1–1.51 – background pollution (good); Supervision of Natural Resources and 41% were audits In its operations, NOVATEK adheres to federal energy electricity consumption by the Group. Initial values by Russian regional public prosecution offices with 6% efficiency regulations (Federal Law No. 261-FZ “On Energy posted prior to the implementation of energy efficiency • 1.5–2.5 – low pollution (satisfactory); performed by other authorities. Saving and Energy Efficiency Improvement”, Resolution of improvement initiatives are used as the basis to calculate the Russian Government No. 600 “On Approving the List consumption reductions. • 2.5–3.5 – moderate pollution (nonhazardous); Following the audits, measures were taken to eliminate of Facilities and Technologies Designated as High Energy the deficiencies identified. Efficiency Facilities and Technologies”, to name a few). The principles of efficient use of energy resources are laid • 3.5–4.5 – high pollution (hazardous); and down at the design stage of new technological facilities 307‑1 A number of NOVATEK subsidiaries and joint ventures through the use of modern technologies and equipment. • 4.5 and more – extremely high pollution (critical). In 2020, the Company was fined for a total of around implement an annual energy saving and energy efficiency RR 1.66 mln for environmental breaches3, avoiding improvement program to enhance the energy efficiency OG3 In general, in 2020, the studies showed that the administrative punishments such as projects of production activities and reduce the amount of The Company uses environmentally safe renewable conditions of environmental components in the target suspensions. resources used. The program comprises measures sources of energy based on solar modules and wind to introduce energy-saving technologies and new turbines. Small-capacity renewable sources of energy energy-efficient equipment, as well as organizational are used to supply power to telemechanics units at trunk and technical measures aimed at reducing energy pipelines and well pads at gas condensate fields. The consumption in all areas of production activities. total number of such renewable energy systems in 2020 was 148, up 16 year-on-year. The energy management system is based on consumption planning and metering, analysis of actual results, and In 2020, we generated a total of 222,000 kWh of adjustment of consumption plans. electricity from renewable sources (146,000 kWh 1. The scale does not include the upper value. 2. Details of biodiversity components monitoring efforts are available in the OG4 section. 3. The calculation is based on the Company’s proportional share in joint ventures, for more details see p. 99. 4. Energy efficiency data is based on 100% Company’s share in joint ventures.
96 97 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020 and 76,000 kWh by solar modules and wind turbines, The use of secondary energy resources drove a 54 mmcm Air Emissions Specific air emissions in 2018–2020, tons/mboe respectively), representing 0.01% of NOVATEK’s total reduction in fuel gas consumption in 2020. electricity generation. The environmental performance data was calculated 1.8% 0.4% Specific energy consumption, defined as the ratio of based on the Company’s proportional share in joint 0.143 Stationary combustion, 0.128 0.128 OG2 electricity consumption to production volume (the volume ventures: 50% in Arcticgas, 50% in Nortgas, 51% in including flaring Investments in renewable energy include the cost of of produced gas in mcm, the volume of condensate, oil Terneftegas, 60% in Arctic LNG 2, and 51% in Cryogas- Fugitive emissions constructing renewable sources of energy to supply power and LNG in tons), is used to assess the energy intensity of Vysotsk. The calculation for Yamal LNG and Sabetta Other to telemechanics units at trunk pipelines and well pads technological processes. International Airport with the Company’s share at 50.1% at gas condensate fields under new investment projects. is based on 60% share due to production of the South- Renewable sources of energy as an alternative to overhead Tambeyskoye field developed by Yamal LNG reported at power lines are applied with an appropriate economic 60% including an additional 9.9% interest not owned by justification for facilities located in remote areas. the Group, since the Group assumes certain economic and operational risks related to this interest. Energy efficiency 2018 2019 2020 97.8% The Company also widely uses secondary energy data is calculated based on 100% Company’s share. resources – heat from flue gases of gas turbines and gas engine generators. Heat generation from secondary energy 305‑6 as conduct diagnostics of their equipment and pipelines resources is an energy-saving cogeneration technology, 30.5 Atmospheric air protection is one of the focus areas of to prevent loss of containment and hydrocarbon reducing the consumption of primary energy resources the Company’s environmental activities, requiring special emissions. (fuel gas). In 2020, heat generation from secondary thousand GJ attention. The Company does not emit highly toxic and energy resources amounted to 2,012 thousand GJ, which 11,71; 9,96; 0,249; 0,102; ozone-depleting substances, and there are no hazardous Approved environmental monitoring programs stipulate accounted for 68% of the total heat consumption. Reduction in energy consumption99%; 90% air pollutants in the Company’s emissions. yearly measurement of emissions from equipment, including but not limited to: The Company set a long-term target of 20% reduction 302‑1 in air pollutant emissions per unit of production by 2030 • booster compressor stations; Energy consumption by NOVATEK production subsidiaries and joint ventures in 2018–20201 compared to the 2019 baseline. • gas turbine power plants; and Metric Units 2018 2019 20202 The Company strives to minimize emissions and ensures Total consumption of heat and electricity thousand GJ 10,337 12,943 13,482 that emergency emission risks are accounted for • furnaces, heaters. at the earliest stages of project design. Emergency Consumption from non-renewable sources (natural gas) to produce heat and thousand GJ 20,720 30,457 34,983 emission prevention is included in FEED and detailed Cryogas-Vysotsk operates an automatic system to electricity documentation for field development and construction monitor industrial emissions, including greenhouse gases Aggregate electricity consumption mln kWh 1,862 2,691 2,927 of hazardous production facilities. Construction of (GHG). Universal advantages of automatic emission -6% new buildings -4%and structures requires, as and when monitoring systems include higher reproducibility of Aggregate heat consumption thousand GJ 3,632 3,253 2,944 stipulated13.78 by applicable14.44 Russian laws, positive conclusion measurements, uniform data acquisition, processing 12.58 11.75 10.44 of a state environmental review and chief state review and visualization algorithms, lower labor intensity and 8.65 302‑3 of engineering survey and design documentation. lower risk for personnel in hazardous areas, as well as Energy intensity in 2018–2020 by process All projects must include provisions for preventing monitoring continuity. emergency emissions, fires, spills, and other emergencies Process Intensity3 2019 2020 2020 Target 2019 by various2020 safety systems2020 suchTarget as emergency The Company runs a Lean Production program to Estimate 2018Actual 2019up to 20302020 protection,Estimate automaticActual fire suppression,up to 2030 and gas eliminate air emissions: sustainable use of formation Gas production, kWh/mcm 2.1 2.4 2.5 detection systems. Additionally, all NOVATEK’s production water (injection to maintain formation pressure) facilities undergo annual preventive maintenance, as well eliminates previously used formation water flaring. Condensate production, kWh/ton 10.7 10.8 10.3
Oil production, kWh/ton 21.4 27.6 34.6 -5% Air emissions-20% in 2018–2020, tons Condensate processing, kWh/ton 6.5 6.6 6.3 0.263 0.248 0.244 Gas liquefaction, including shipments of LNG and gas condensate (Yamal LNG), kWh/ton 107.6 87.9 91.8 2018 2019 2020 0.128 0.149 0.143 Air emissions, total 70,302.0 75,603.1 87,272.6 14.1 The energy efficiency target, specific energy consumption for generation produces an integrated effect, reducing both Including major pollutants: gas and gas condensate production and treatment, was set fuel gas consumption2019 for heat2020 generation2020 and greenhouseTarget 2019 2020 2020 Target Estimate Actual up to 2030 Estimate Actual up to 2030 at 4.5 kWh/ton. In 2020, the value amounted to 3.8 kWh/ton4. gas emissions. • Particulate matter 3,873.5 2,696.6 5,590.3
• Carbon monoxide 37,386.9 40,059.2 48,114.3 Broad application of cogeneration in technological In 2020, estimated fuel gas savings due to cogeneration 6.7 5.9 processes of natural gas compression and electricity technologies amounted to 54 mmcm. • Nitrogen oxide (NO2 equivalent) 8,466.7 13,295.9 11,082.6 up to 99% up to 90% • Sulfur dioxide 28.2 62.0 77.4 95%* 96% 96.2% 1. Energy consumption for 2020 includes the following companies: NOVATEK-Yurkharovneftegas, NOVATEK-Tarkosaleneftegas, NOVATEK- 75% • Hydrocarbons77% 69%(incl. methane) 7,677.3 6,166.3 8,909.9 Purovsky ZPK, NOVATEK-Ust-Luga, NOVATEK-Transervice, NOVATEK-Pur (included in 2019), Arcticgas, Nortgas, Yargeo, Terneftegas, 2018 2019 2020 Cryogas-Vysotsk (included in 2019), Yamal LNG, Arctic LNG 2 (included in 2020), and NOVATEK-Murmansk (included in 2020). • VOCs 12,851.6 13,258.2 13,417.8 2. The increase in energy consumption in 2020 is due to the inclusion of data on consumption by Arctic LNG 2 and NOVATEK-Murmansk, as well as the commissioning of new facilities at the North-Russkiy cluster. 3. Gas and condensate production energy intensity excluding Yamal LNG. • Other 17.8 64.9 80.3 4. Including Yamal LNG. 2019 2020 2020 Target 2019 2020 2020 Target Estimate Actual up to 2030 Estimate Actual up to 2030
98 99 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
305‑7 Scope 1 GHG emissions breakdown in 2020 In 2020, air emissions totaled 87.3 thousand tons. Fueling 0.4% stations of NOVATEK-AZK are located0.143 in urban territories 1.8% Stationary combustion, 9,055,750 tons 228,498 tons 173,250,940 tons of CO equivalent of CO equivalent of CO equivalent (in large0.128 cities, such as0.128 Chelyabinsk, Zlatoust, Rostov-on- including flaring 2 2 2 Don and Volgograd), with total 2020 emissions of 19 tons, Fugitive emissions or 0.022% of all emissions by NOVATEK. Other
In 2020, specific air emissions amounted to 0.143 tons per mboe1.
GHG emissions 2018 2019 2020 97.8% 305‑1 The Company’s subsidiaries successfully implemented the Greenhouse Gas Emissions Management System Standard, GHG Emissions Management System with ISO 14064-1:2007 which establishes key principles and requirements for GHG “Greenhouse gases – Part 1: Specification with guidance emissions management in subsidiaries and joint ventures. at the organization level for quantification and reporting The Company’s corporate GHG Emissions Management of greenhouse gas emissions and removals”. System is tailored to its production processes, feedstock 11,71; 9,96; 0,249; 0,102; composition and equipment. The system complies with 305‑3 99%; 90% ISO 14064-1:2007 and Russian Government Resolution No. In 2020, Scope 3 GHG emissions (indirect emissions from 504-R dated 2 April 2014, as well as the Guidelines for the use of Company’s production volumes) totaled 2 Calculating GHG Emissions approved by Order No. 300 of 173,250,940 tons of CO2 equivalent . 14.4 the Russian Ministry142,704 of Natural Resources and Environment 13.6 dated 30 June 2015. GHG emissions were calculated in NOVATEK sets both short and long-term targets for DIRECT EMISSIONS INDIRECT EMISSIONS INDIRECT EMISSIONS accordance with the technique approved by Order No. reducing GHG emissions intensity.10.4 2,805,776 Company’s operations Energy purchased Use and processing 300 of the Ministry of Natural ResourcesHydrocarbon and Environment by the Company of products sold dated 30 June 2015 “On the Approval ofproduction Recommended The short-term target is to keep specific emissions Scope 1 Scope 2 Scope 3 Practices and Guidelines for the MeasurementLNG production of GHG below the levels of the base year: 2016 for hydrocarbon Emissions by Business and Other EntitiesHydrocarbon Operating in the production, 2017 for hydrocarbon processing, and 2018 for Russian Federation”. processing LNG production. GHG specific emissions in 2020 did not exceed these baselines. -6% -4% 589,017 Energy service facilities 13.78 14.44 305‑1 5,518,253 2018 2019 2020 305‑1 305‑2 305‑3 OG6 12.58 11.75 10.44 In 2020, direct GHG emissions (Scope 1) totaled Long-term targets to be achieved by 2030 are to reduce Total GHG emissions in 2018–2020, mt of CO2 equivalent 8.65 3 9,055,750 tons of CO2 equivalent. Scope 1 emissions Scope 1 GHG emissions from the base year , namely: from stationary combustion, including flaring, totaled 2018 2019 2020
8,852,968 tons of CO2 equivalent, fugitive emissions • reduce methane emissions per unit of production in the Direct emissions (fuel combustion and operation of production 6,054.2 11,114.9 9,055.8 2019 2020 2020 Target 2019 2020 2020 Target totaled 166,816 tons of CO2 equivalent with other production, processing and LNG segments by 4%; facilities) – Scope 1 Estimate Actual up to 2030 Estimate Actual up to 2030 emissions at 35,966 tons of CO2 equivalent. • reduce GHG emissions per unit of production in the Indirect emissions (purchased energy) – Scope 2 187.8 204.8 228.5 305‑2 upstream segment by 6%; and Location-based energy indirect (Scope 2) GHG emissions Indirect emissions – Scope 3 – – 173,250.9
totaled 228,498 tons of CO2 equivalent, including • reduce GHG emissions per ton of LNG produced by 5%. -5% -20% emissions in the Yamal-Nenets Autonomous Region (Ural Interconnected Power System, Tyumen Region): Specific GHG emissions by facilities in 2019–2020 compared to the base year 0.263 0.248 0.244 204,184 tons of CO2 equivalent; and the Leningrad Region (North-West Interconnected Power System): 24,314 tons 0.128 0.149 0.143 mmt of Specific emissions Specific emissions Specific emissions of CO2 equivalent. in the base year in 2019 in 2020 14.1 Production facilities, tons of CO equivalent per mboe 15.85 12.58 8.65 CO e 2 2019 2020 2020 Target 2019 2020 2020 Target In 2021, an independent audit by Bureau Veritas 2 Estimate Actual up to 2030 Estimate Actual up to 2030 Certification Rus verifying data on 2020 Scope Processing facilities, tons of CO equivalent per ton of 0.041 0.034 0.031 9 2 1 and 2 GHG emissions was performed. Bureau Veritas processed hydrocarbons Certification Rus confirmed the compliance of NOVATEK’s Scope 1 emissions 6.7 LNG production facilities, tons of CO equivalent per 0.27 0.26 0.24 5.9 2 ton of LNG up to 99% up to 90%
95%* 96% 96.2% Methane emissions in 2018–2020, tons 75% 77% 69% 1. The increase2018 in specific2019 air emissions in2020 2020 was driven by production capacity growth. The North-Russkoye and East-Tazovskoye 2018 2019 2020 fields came onstream in 2020 as additional sources of emissions. 2. Scope 3 GHG emissions from the use of Company’s production volumes were calculated for the first time ever in 2020. The Production facilities 7,162.7 5,913.0 8,390.8 calculations used Scope 3 Accounting and Reporting Standard of the Greenhouse Gas Protocol, version 1.0, with the assumption for 2019 2020 2020 Target 2019 2020 2020 Target category 11 (Use of sold products) that all production volumes were combusted Processing facilities 102.4 88.4 84.0 Estimate Actual up to 2030 Estimate Actual up to 2030 3. 2019 is the base year for the long-term targets.
100 101 14% 12% 19% The Bank of New York Equity Mellon** Debt 7% OOO Ena Invest TOTAL E&P HOLDINGS RUSSIA 10% 19% SWGI Growth Fund (Cyprus) Limited OOO Gazprom Capital 15 56 14% 13 Frequency OOO Levit 88% 50 17% 1.06 rate of injuries Other (less than 5% 10 each)
28 0.79 0.81 Creating Sustainable Value
9,055,750 tons 228,498 tons 173,250,940 tons 2018 2019 2020 2018 2019 2020 Our corporate purpose is to create sustainable value for all our stakeholders across the entire value chain. of CO2 equivalent of CO2 equivalent of CO2 equivalent
For NOVATEK, creating sustainable shareholder value means:
SUSTAINABILITY MANAGEMENT: AFFORDABLE, SOCIAL VALUE SAFE AND CLEAN Board of Directors Remuneration and ENERGY Nomination Committee Occupational health defines sustainable and safety for Secure supplier development strategy; prepares personnel and of clean fuel performs risk recommendations to contractors assessment; support the Board’s Mitigating negative Creating decent jobs monitors progress decision-making on environmental sustainability Tax payments THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020 impact Educational Implementation of Sustainability Working programs energy-efficient Group involving all Sustainable Development Direct GHG emissions in 2020 by source type (Scope 1), Methane emissions per unit of production for production, 306‑3 technologies functional departments Division Supporting local tons of CO equivalent processing and LNG facilities in 2018-2020, tons/mmboe Waste generation by hazard class in 2020, tons Waste generation in 2018–2020, mt 2 communities in the Biodiversity 14.4 determines focus areas coordinates regions of operation 142,704 13.6 3 27 79.6 conservation 2,376 1,919 Class 1 – extremely for sustainability efforts sustainability actions to DIRECT EMISSIONS INDIRECT EMISSIONS INDIRECT EMISSIONS Charity 10.4 hazardous — 0.01% Occupational and coordinates ensure transparency and Company’s operations Energy purchased Use and processing 2,805,776 Class 2 – highly departments’ relevant creation of long-term 49.6 safety Compliance with Hydrocarbon by the Company of products sold47.2 hazardous — 0.06% efforts sustainable value for human rights production Scope 1 Class 3 – moderately Scope 2 Scope 3 stakeholders LNG production hazardous — 4.05% Hydrocarbon Class 4 – low processing hazardous — 90.84% Energy service facilities 589,017 Class 5 – virtually 5,518,253 2018 2019 2020 42,889 non-hazardous — 5.03% 2018 2019 2020 LONG-TERM SHAREHOLDER VALUE
Return on capital Responsible business Driving innovation Responsible business 305‑4 (95%), while cutting direct GHG emissions by 1.2 mmt of In 2020, the Group’s operations generated 47,214 tons of 306‑4 Climate change High economic Effective and transparent Information In 2020, specific GHG emissions stood at 8.65 tons CO2 equivalent. waste, down 41% year-on-year. The share of very highly In 2020, the Group utilized 22,574 tons of hazardous management value added corporate governance security of CO2 equivalent per mboe for production facilities, hazardous and highly hazardous waste (classes 1 and 2) and non-hazardous waste, either internally or outside
0.031 tons of CO2 equivalent per ton of processed In addition, in 2020, a new technique to calculate was insignificant (below 0.1%), found mainly in mercury the Company by licensed contractors. The Company’s hydrocarbons for processing facilities, and 0.24 tons pollutant emissions from APG combustion, developed on lamps and fluorescent tubes containing mercury, as well purpose is to get 100% of hazardous waste utilized or of CO2 equivalent per ton of LNG for LNG production Yargeo’s initiative, was included in the official list of the as spent lead-acid batteries. The rest was moderately treated. facilities. Russian Ministry of Natural Resources and Environment. hazardous and low-hazard waste of classes 3, 4 and 5. The growing market capitalization and total shareholder returns are driven by the Company’s sustainability This technique can be used not only at the Yarudeyskoye The bulk of waste was low-hazard or practically non- 306‑5 efforts as well as its financial and operational performance. In 2020, methane emissions from production grew by field but also on other fields where flares use extra hazardous (mainly drill cuttings). In 2020, a total of 3 tons of hazardous waste were 30% year-on-year to 8,390.8 tons, while emissions from air supply to reduce pollutant emissions and energy treated, with 16,522 tons of non-hazardous waste processing decreased 5% year-on-year to 84.0 tons. consumption. OG7 treated, and 6,976 tons of non-hazardous waste landfilled. The increase in methane emissions in 2020 was driven In 2020, well drilling for natural gas, gas condensate by production capacity growth. The North-Russkoye and oil by the Group generated 37,445 tons of drilling The Company takes a responsible approach to waste Good Health Quality Affordable Decent Work and East-Tazovskoye fields came onstream in 2020 as mud, of which 11,951 tons were treated and 20,517 tons disposal by compliance with approved instructions Climate Action and Well-being Education and Clean Energy and Economic Growth additional sources of emissions. Waste Generation and were utilized. In order to reduce drilling waste impact and generally accepted safety practices and by Management on the environment, drilling mud is utilized by using environmental monitoring of waste handling. In 2020, The Company had no accidents with methane leaks thermal desorption and other physical and mechanical 2,275 tons of non-hazardous waste were landfilled within NOVATEK’s Sustainable Development Strategy is aligned with the UN Sustainable Development Goals, in 2020. methods found to be acceptable by state environmental the Company’s premises, and 1,426 tons of waste were with five SDGs prioritized by the Company. NOVATEK uses a systemic approach to manage waste review. A unique drilling mud processing system at the landfilled outside the Company’s premises by licensed 305‑5 of hazard classes 1–5 throughout the life cycle, from Yurkharovskoye and South-Tambeyskoye fields effectively contractors. 3,275 tons of non-hazardous waste were Associated petroleum gas providing safe temporary storage of waste to waste solved the problem of drilling mud utilization for drilling sent for storage in a specialized facilities both within treatment, landfilling and utilization. The Company on the shore of Ob Bay, while providing significant and outside the Company’s premises. 16,525 tons The Company makes every effort to use associated chooses the most advanced methods for waste reuse. environmental and economic benefits through the reuse of production and consumption waste were treated petroleum gas (APG) efficiently.The Company set a NOVATEK uses the resource-based view of waste of oil-base mud. internally or by specialized contractors. target to increase the APG utilization rate to 99% by management to reuse waste, whenever possible, 2030. in manufacturing and business activities by finding We have an ever-growing separate waste collection and consumers that can recycle the Company’ waste. 306‑3 disposal system deployed across operations. Leveraging In 2020, NOVATEK pushed efficient APG use to 96.17%, a All subsidiaries and joint ventures keep primary records this system, NOVATEK-Yurkharovneftegas, for instance, significant year-on-year improvement, 5.1 bcm of APG NOVATEK set a target to increase the share of waste of waste generation and movements to make sure waste benefits from selling its waste after separate collection. were used efficiently, while close proximity of natural directed to utilization and disposal to 90% by 2030 data are available and traceable. The following types of waste were sold in 2020: waste gas treatment facilities enables gas treatment to compared to the 2019 baseline. oils, spent batteries, plastic containers, paper and the requirements of STO Gazprom 089-2010 and sale The Company does not transport, import, export or treat cardboard waste, ferrous scrap, pipes, and catalysts. In through a trunk gas pipeline system. A synergy of oil 306‑1 306‑2 waste deemed hazardous under the terms of the Basel 2020, NOVATEK extended the existing separate collection and gas treatment and transportation facilities enables The Company strives to increase waste recycling to Convention Annexes I, II, III, and VIII, and does not ship system rolled out across our operations to several more economic production of APG. mitigate potential impact on the environment. In 2020, a such waste internationally. subsidiaries. total of 879 tons of waste were reused, including 3 tons of In order to comply with the governmental requirement waste paper and cardboard, 802 tons of ferrous and non- to utilize at least 95% of APG, NOVATEK commissioned ferrous scrap, 5 tons of spent batteries, 57 tons of spent booster compressor stations at its producing assets: industrial oils, and 13 tons of catalyst waste, which helped % % NOVATEK-Tarkosaleneftegas, Yargeo and Arcticgas. With to prevent negative impacts on the environment. the new facilities, APG flaring does not exceed 5%, with minimal negative impact on the environment. The Company implements initiatives to reduce waste generation. For example, in 2020, the Group reused 69 41 In 2020, a project to inject APG into deep absorbing 2,491 cubic meters of industrial oils by using the TCC Share of waste directed horizons while producing oil from the Yarudeyskoye Hammer Mill system for thermal desorption of drilling Reduction of waste generation field helped Yargeo to achieve APG utilization target waste. to utilization and disposal in 2020
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306‑4 303‑3 Utilized waste in 2020, tons Water withdrawal by source type and category in 2020, mcm
Within the Company’s Outside the Company’s TOTAL Water source Total Freshwater Other water premises* premises* Groundwater 827 827 - Hazardous waste Third-party water 29 29 - Processed and utilized – 27 27 Surface water 1,184 1,096 88 Non-hazardous waste TOTAL 2,040 1,952 88 Processed and utilized 6,163 16,411 22,574
* Waste was categorized into hazardous and non-hazardous depending on the hazard class, i.e. waste of hazard classes 1 and 2 were categorized as hazardous; wastes of classes 3–5, as non-hazardous. In 2020, specific water consumption by production standards. These requirements are used to determine 306‑5 facilities dropped 41% to 2.17 cubic meters per mboe, due discharge limits for specific water bodies and get Unutilized waste by disposal in 2020, tons to completion of an exploration well drilling in the water approvals for these limits from regulators. The Group area. Specific water consumption by processing facilities observes established limits in all operations. Chemicals Within the Company’s Outside the Company’s TOTAL dropped by 7% to 0.01 cubic meters per mt of products to be removed from contaminated water and removal premises* premises* due to an increase of condensate processing volumes requirements are determined in accordance with the compared to water consumption. applicable Russian laws and regulations using the risk- Hazardous waste based approach, followed by water treatment to remove Treated – 3 3 these chemicals. Discharged wastewater is classified by salinity as freshwater. TOTAL – 3 3 Water discharge
Non-hazardous waste The Company uses the following wastewater discharge The Company does not discharge hydrocarbon Landfilled 2,275 1,426 3,701 destinations: contaminated water into water bodies.
Sent for storage in a specialized facility 3,272 3 3,275 • injection for pressure maintenance; 303‑1 Treated 5,926 10,596 16,522 The Company’s efforts to identify and prevent negative • combustion in horizontal gas flare systems; impacts on water resources are based on measurements TOTAL 11,473 12,025 23,498 and chemical analysis: the Company’s facilities develop, • injection into formations with high injectivity; and update as necessary, and implement monitoring programs which include wastewater sampling and chemical analysis Water Use 303‑5 • surface discharge. in accordance with all applicable procedures. Wastewater and Discharge In 2020, total water consumption by the Company sample analysis shows that hydrochemical parameters across its footprint decreased by 14% year-on-year In 2020, the Company’s total water discharge (excluding of effluents and pollutant concentrations fall within to 2,040 mcm (excluding produced water reinjected water injected for pressure maintenance) stood at permissible limits. 303‑1 303‑4 for pressure maintenance), with most water used for 1,705 mcm, down 29% year-on-year. 1.8 NOVATEK is committed to sustainable water use and production needs. Surface water and groundwater are Aiming to use water resources sustainably and reduce 1.6 efficient wastewater treatment. The Company keeps the main sources of water, accounting for 58% and 41% 303‑2 303‑4 impacts on water1.4 resources as well as to preserve primary records of consumed and discharged water, of total water withdrawal in 2020, respectively. 630 mcm of wastewater treated to standard quality were aquatic biological resources and their environments, the with withdrawal and discharge volumes verified by discharged into water bodies. All wastewater undergoes Company designs wastewater treatment systems for authorized state regulators inspecting compliance OG5 primary treatment before any discharge, including flaring new facilities, treats all discharged wastewater, monitors with laws and regulations on waterbody protection at In 2020, produced water totaled 7,763 mt, including and injection. Requirements for effluent quality are set effluent quality, and complies with applicable standards. intervals depending on risk-based environmental footprint water from production wells (4,531 mt) and water wells by applicable laws and regulations, including industry ranking. Additionally, the Company follows environmental (3,232 mt). 5,538 mt of water were injected for pressure monitoring procedures. No conflicts related to water maintenance. resource use with local community stakeholders were 2018 2019 2020 reported in 2020. 303‑4 303‑3 Water consumption in 2018–2020, mcm Water discharge by destination in 2020, mcm Water consumption by destination in 2020, mcm Water use
37 24 2,537 201 303‑1 2,365 145 Groundwater - 51% Production needs - 64% NOVATEK does not operate in water-scarce areas. 2,040 Water bodies – 37% General needs - 26% The International Water Management Institute Gas flare systems – 9% Other- 10% describes Russia as a “sodden” region abundant in Third parties – 2% water resources. Therefore, the Company runs no risks Wastewater stabilization related to water resources and does not set specific ponds – 1% targets to reduce water use; however, reasonable water 630 532 consumption is part of the Company’s environmental 869 1,307 protection policy. 2018 2019 2020
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Wastewater discharged into surface water bodies – Ob irradiation. Chemically and oil contaminated industrial Biodiversity Conservation and zone issued by the Ministry of the Environment of the Bay in the Kara Sea and Luga Bay in the Gulf of Finland – effluents are treated in a dedicated treatment plant Disturbed Land Remediation Chelyabinsk Region in 2020. qualifies as treated to standard quality. The Company with a daily throughput capacity of 2,450 cubic meters to makes use of mechanical, membrane, and biological quality standards permitting downhole injection. Before Areas of high biodiversity value outside protected areas treatment technologies, as well as UV disinfection. injection, wastewater undergoes separation, two-stage Matters of biodiversity conservation and disturbed designated by Russian laws include land and waters flotation, and post-treatment in a pressure sand filter. land remediation are part of NOVATEK’s Health, Safety identified by international environmental organizations Stormwater treatment facility with a capacity of and Environment Policy and are always included in as environmentally and biologically important. Well- 3,600 cubic meters per day and sewage treatment facility NOVATEK subsidiaries regularly monitor the hydrological EIAs prepared for the Group’s projects in accordance known examples are Ramsar wetlands and important with a capacity of 1,500 cubic meters per day were built and hydrochemical parameters of water bodies in areas with Russian and, for some projects, international bird areas, which are all outside the areas of direct and commissioned at the Integrated Facility for Gas where the water bodies are crossed by pipelines. requirements. Engineering and design documentation impact by the Group’s projects. As regards marine Production, Treatment and Liquefaction with LNG and for construction projects provides for the prevention, environments, pursuant to the UN Convention on Gas Condensate Offloading of the South-Tambeyskoye In 2020, 38 of the Company’s wells (28% of the total) mitigation and compensation of negative impacts of Biological Diversity, an approach was proposed to gas condensate field. The treatment process employs were drilled with hydraulic fracturing. All operations used the planned activities on biodiversity components. identify ecologically and biologically significant marine mechanical, biological, physical, and chemical methods. viscoelastic fluids. Adequacy and effectiveness of these provisions are areas (EBSAs) in the open-ocean waters and deep-sea Treated wastewater is disinfected with ultraviolet confirmed by follow-up monitoring in areas potentially habitats that may require development of environmental affected by the projects. protection strategies by governments and international organizations. Development of this approach resulted in In 2020, the main content of NOVATEK standard ISU-0-14 listing some shelf areas, including areas in the Russian Biodiversity Conservation Management was ready, with Arctic and coastwise the Kamchatka Territory, as a multistage internal review procedure completed. The EBSA. Parts of these areas are used in the interests Environmental safety while drilling in shallow waters of Ob Bay1 document approval and implementation is scheduled of the Company (for navigation and marine transport for 2021. infrastructure), therefore NOVATEK and its subsidiaries NOVATEK drilled its first well in Ob Bay in 2018. Arctic LNG which successfully passed state environmental review. and joint ventures initiated significant expansion of the 3, a subsidiary of NOVATEK, successfully completed the Well construction also included water body monitoring In 2019, under the Ecology national project and the scope of comprehensive environmental monitoring of construction of an exploration well with a target depth under a program approved by the local territorial body of Business and Biodiversity initiative, the Ministry of the Kara, Barents and Baltic Sea ecosystems. of 2,800 meters on the North Obskiy license area – the the Federal Water Resources Agency. Monitoring stations Natural Resources of Russian Federation issued first NOVATEK’s well in Ob Bay (internal waters of Russia). were placed in all geographical directions 250 and guidelines for the content of corporate biodiversity So far, no critical habitats2 have been identified in zones The well was drilled by a jackup rig. The well design and 500 meters from the jackup rig. conservation programs. Yamal LNG played the most directly affected by the Group operations. Such studies materials were analogous to those used on continental active role in the discussion of this initiative, as its of marine habitats are scheduled for 2021 and will cover shelf. The well program provided for a logging and testing All operations included environmental control: separate biodiversity conservation program is an important part part of Ob Bay and adjacent shallow Ob-Yenisei waters of suite, including cased hole tests. After 86 days, all goals waste and wastewater tracking, storage, transportation of sustainable development principles of the project the Kara Sea. The results of these studies will determine were achieved and the well was plugged and abandoned. and processing (all drilling waste, including drilling and a strategic, high-level planning document creating amendments, if any, to previously adopted biodiversity The well discovered the North Obskoye field. wastewater, was stored in sealed tanks on the platform a framework for biodiversity conservation management. conservation and monitoring programs and plans. or support vessels), with continuous scheduled laboratory Pursuant to this program, a Biodiversity Conservation Operations in Ob Bay were continued in 2019. Arctic control of wastewater (the laboratory was on the Plan was developed and implemented in accordance LNG 1 drilled a similar well on the shallow waters of the shore base). It is worth noting that all water pumps with the International Finance Corporation Performance Biodiversity monitoring Geofizicheskoye field. were equipped with fish protection devices approved Standard 6 Biodiversity Conservation and Sustainable by the Federal Agency for Fishery. The Company also Management of Living Natural Resources. OG4 Wells were drilled and completed with constant focus on implemented compensatory measures by releasing In 2020, integrated monitoring of marine ecosystems environmental safety. Environmental monitoring included muksun and Siberian sturgeon into the West-Siberian 304‑1 covered the waters and shores of the Kara Sea (Ob three stages (before, during and after drilling) and Basin rivers. NOVATEK does not produce or process natural resources Bay), the Barents Sea (Kola Bay, Kildin Strait) and the complied with the engineering and design documentation, in federal-level protected areas and is committed to Baltic Sea (Luga Bay, Vyborg Bay) in areas potentially care for the environment and biodiversity conservation affected by the Group operations. Terrestrial and in its operating regions, paying special attention freshwater ecosystems were monitored within license to substantiating the choice of locations for its areas and in zones affected by projects in the Yamal- production sites and contributing to the development Nenets Autonomous and Khanty-Mansiysk Autonomous of regional infrastructures. NOVATEK has one linear Regions, the Leningrad and Murmansk Regions. Environmental safety in deep-water drilling facility (an underground gas pipeline) running through a small part of a regional-level natural landmark. The Environmental monitoring by the Group production In 2020, a consortium of NOVATEK, Total (France) and Eni monitored with laboratory control. Acoustic impacts in the Company financed the pipeline in partnership with the subsidiaries covered the largest areas, collecting and (Italy) drilled the first well on the Lebanese shelf. Total E&P supply base located in the port of Beirut were measured on Administration of the Chelyabinsk Region to expand analyzing information on terrestrial and freshwater Liban SAL was the project operator. The well depth was a regular basis. Sea bottom in the well construction area gas infrastructure to the Dzhabyk village, which was a ecosystems of license areas. The observations in 4,190 meters in over 1,500 meters of water. All operations was monitored with an ROV (remotely operated vehicle) significant contribution to the development of socially 2020 showed that the conditions of environmental strictly complied with the effective international and local throughout the construction period. important infrastructure. Running a distribution gas components in monitoring stations on 38 fields and laws as well as international best practices. The consortium pipeline through a regional-level natural landmark does license areas were satisfactory with a low level of conducted field studies, developed and obtained approval As a result, the well construction was successfully not violate its protected status, which was confirmed environmental pollution. for an Environmental Impact Assessment (EIA), arranged completed and required geological information was by the positive findings of a state environmental public discussions, and monitored and controlled the obtained in full compliance with the EIA, without any appraisal of the gas pipeline engineering and design The fact that anthropogenic loads are close to operations at all times. All work followed the zero discharge threat to the environment in the construction area and documentation and the positive findings of an expert background values in the areas of the Company’s principle. Waste handling and utilization were closely onshore facilities supporting the operations. review of the project for forest use in the pipeline buffer responsibility is confirmed by an analysis of hundreds
1. In accordance with Federal Law No. 188 “On Subsoil” dated 26 July 2017, only companies with state ownership of more than 50% may be subsoil users on the Russian continental shelf. NOVATEK does not qualify as such company and does not engage in such activities. 2. Term from IFC Performance Standard 6.
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of samples of air, soil, snow cover, surface water, the Barents Sea near the LNG Transshipment Complex The 2020 monitoring, which was a follow-up of the 2019 groundwater, and bottom sediments. RR of NOVATEK – Western Arctic2. Several specialized comprehensive studies of the marine environments of contractors with adequate equipment and competent the Ob estuary initiated by Yamal LNG, was arranged by In case of unexplored territories, such as the Gydan personnel were engaged to complete this work. The Arctic LNG 2, which engaged Murmansk Marine Biological Peninsula, environmental monitoring of NOVATEK’s license mln studies found that most hydrochemical, hydrophysical Institute of the Russian Academy of Sciences, V.I. Il’ichev areas provides unique data on the biological diversity of 134 and hydrobiological parameters of marine ecosystems Pacific Oceanological Institute of the Russian Academy of terrestrial and freshwater ecosystems. Specifically, in in areas potentially affected by the Group operations Sciences, Typhoon Research and Production Association 2020, the geobotanical studies of Utrenniy license area Spent on environmental remained at the background levels characteristic of under the Federal Service for Hydrometeorology and flora added 16 new species previously not known to be monitoring in 2020 local waters and agree very well with archival and Environmental Monitoring and a number of other research, present on this territory. The Company has collected literature data as well as site surveys. engineering and testing laboratory centers. The 2020 and analyzed information on the ecological succession monitoring boast the largest geographical coverage, of species on areas with completed remediation: in The most extensive integrated multiyear marine study time span and work scope: firstly, observation stations particular, plant species diversity and abundance were involving NOVATEK is ongoing in Ob Bay of the Kara and lines spanned the entire Ob Bay from the transit lines found to be increasing, with gradual assimilation of Sea, as some parts of the study area affected by of the Bely Island at the north to the village of Seyakha the areas by surrounding ecosystems. The studies Yamal LNG (operating LNG and stable gas condensate at the south; secondly, field studies were carried out specifically addressed and found no objective proof of the long-tailed duck, confirmed the bird’s presence terminal in Sabetta) and Arctic LNG 2 (Utrenniy terminal twice during the warm season: in August and September of undesirable spread and naturalization of species and normal numbers for the warm season not only on and LNG and stable gas condensate on gravity based 2020; thirdly, the traditional suite of hydrophysical and not native to the Gydan tundra but commonly included the Yamal Peninsula but also on the Gydan Peninsula, structures). hydrochemical studies was supplemented with recording in grass seed mixtures used in remediation for fast including areas in the immediate vicinity of process underwater noise generated by both natural features meadow formation, therefore, areas with remediated facilities and construction sites. In 2020, the Company processed the data of and processes and human activities: navigation and vegetation are not sources of bioinvasion. Comprehensive environmental monitoring of Ob Bay underwater operations. In 2020, the Arctic Fox project continued scientific area affected by the Yamal LNG project for 2019. The Good condition of vegetative cover on the Company’s observation of arctic foxes (Vulpes lagopus): key objective of a comprehensive (integrated between The work produced a large amount of completely new license areas was also confirmed by third-party researchers from the Arctic Research Station of the components and linked to the activities in progress) objective data on the natural communities of Ob Bay research. For example, in 2020, the Arctic Research Institute of Plant and Animal Ecology of the Ural Branch program is to design effective controls for all major and impact from marine transport and underwater Center published previously collected data of of the Russian Academy of Sciences and the Center environmental risks of Yamal LNG and scientifically prove operations (dredging, dumping, making foundations) vegetation monitoring on license areas of the South- for Arctic Development with support from Yamal LNG that its operations do not harm Ob Bay by changing thereon. The interpretation of these unique materials Tambeyskoye and Yarudeyskoye fields. Vegetation on put special electronic collars for satellite monitoring its hydrological conditions, depleting fish stocks or is now ongoing, using all available data, thermohaline the plays of both fields does not contain hazardous on nine animals near Sabetta and five animals on the populations of rare and protected species, destroying structure models of waters and hydrodynamic concentrations of heavy metals and arsenic. The Utrenneye oil and gas condensate field. This will help in or degrading unique ecosystems, or impeding natural processes and leveraging advanced remote Center plans to use the data to develop regional quality tracking arctic fox migrations, obtaining more data on resource use by local population and indigenous peoples, observations – ultrahigh resolution space imaging in standards for various components of the environment, their populations and amending recommendations on and fully comply with all Russian and international various spectral ranges. set maximum allowable concentrations of trace mitigating the impacts of NOVATEK’s facilities on the requirements. elements and for environmental monitoring1. arctic fox. Animal movement monitoring is supplementing It was the first ever study with such level of detail of with body tissue sampling for isotopic analysis Main results of the Comprehensive Program are the behavior of suspended substances and planktonic Another focus of environmental monitoring during the to reconstruct the predators’ diet. The research expected to be disclosed to stakeholders in 2021: organisms in the water of Ob Bay, interaction between year was terrestrial vertebrates, including birds as their methodology is aligned with the Arctic Council’s CAFF seawater and river water in the Ob estuary (manifested most diverse group. Avifauna observation using point and CBMP program guidelines. • the first detailed one-time survey of hydrodynamic in resulting hydrophysical and hydrochemical parameters counts and the line transect method and analysis of and hydrochemical conditions of Ob Bay has been of the waterbody), which recorded sonographs archival data resulted in quantitative estimates of bird Environmental monitoring also includes detailed studies completed in the fresh river water and seawater of marine mammals and tankers and determined numbers in the Group operating areas, confirming that of the fauna of continental rivers and lakes used mixing zone of the Kara Sea; boundaries of navigation and underwater operation their negative impacts on avicenosis was marginal, for the Company’s projects. A special ichthyological impacts on marine biota (it was proven beyond doubt if any. As measures to prevent direct human impacts study in 2020 focused on two rivers on the Gydan • the key findings from a pre-project assessment of the that these impact do not reach outside the predicted (hunting, destroying nests, keeping domestic animals in Peninsula flowing into Ob Bay near the Utrenniy terminal Yamal LNG project risks and impacts on the Ob Bay impact zones). Also, the rate and direction of shoreline rotation camps) were successful overall and disturbing construction site (Arctic LNG 2) which were expected ecosystems have been confirmed; movement near the Utrenniy terminal was determined factors (light and noise pollution, human presence) to be the most affected. The study conducted by the and lithodynamic monitoring grid was placed at the area and man-made structures, including overhead power Tyumen Branch of the Russian Federal Research Institute • the status and productivity of plankton and benthic of contact between sea and land. transmission lines, are localized, experts consider it of Fisheries and Oceanography – a leading regional communities in the project area, as well as the rate of possible that some avian species (greater white-fronted institution in hydrobiology research – showed that water recovery of marine bottom communities at dredging It was established that, as in 2017–2019, the marine goose, long-tailed duck, king eider, to name a few) may bodies in potentially impacted areas fully retained their and soil dumping sites have been assessed; ecosystems of Ob Bay are in a good condition overall, “get used” to disturbed habitats and anthropogenic properties as fisheries, no indicators of ichthyocenosis and habitats are not disturbed outside the areas impacts, as birds actively use built-up areas for nesting, transformation relative to background parameters were • background data have been collected to control directly used for underwater operations: dredging, feeding, resting, and short-time shelter. found, species numbers and ichthyomass remained high, the risk of introducing invasive alien species to the dumping, and construction of various structures. test catches did not show any stress in fish. Sabetta seaport area due to shipping and ballast Long-tailed duck (Clangula hyemalis), a species native to water discharge; and Final monitoring reports are submitted every year the Arctic and Baltic region, with one of the largest but Marine studies and monitoring in 2020 covered Luga in due time to authorized territorial governmental supposedly shrinking population, was previously selected Bay of the Baltic Sea in the area of potential impact • a list of indicator species for Ob Bay has been authorities (for the Yamal-Nenets Autonomous Region, as an indicator species for the avifauna of the South- of NOVATEK-Ust-Luga stable gas condensate terminal, compiled, as the indicator species for Arctic marine in particular, the Department for Nature and Resource Tambeyskoye license area (subsoil user: Yamal LNG). The Kola Bay of the Barents Sea near the LNG Construction ecosystems proposed at the federal level are not Regulation, Forestry Relations and Oil and Gas Industry 2020 monitoring, focused on studying wetland habitats Center of NOVATEK-Murmansk, and the Kildin Strait of found in estuarine habitats. Development).
1. Details are available at https://arctic.yanao.ru/presscenter/news/33207/. 2. Arctic Transshipment after 19 March 2021.
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4 Environmental damage compensation with reforestation projects agreed with the Department for The Company’s 2020 Achievements in Environmental Protection Nature and Resource Regulation and Forestry Relations of 304‑3 the Yamal-Nenets Autonomous Region. Seeds and planting The Company is fully aware of the consequences of its stock were obtained from the plant nurseries of the Khanty- NOVATEK’s Environmental Progress in fueling station network operations and acts to compensate any damage and Mansiysk Autonomous Region and the Sverdlovsk Region. In and Climate Change targets5 development in Europe restore the environment. In 2020, NOVATEK subsidiaries 2020, reforestation in the Tarko-Sale forestry area covered and joint ventures worked in several directions. about 120 ha, with a much larger scope planned for 2021. In August 2020, the NOVATEK Board of Directors In December 2020, Novatek Green Energy6 opened its first approved the Company’s Environmental and Climate carbon-neutral7 LNG fueling station in Rostock, Germany. Compensatory Land Change targets for the period up to 2030, including the The carbon footprint of the LNG sold to consumers, fish stocking remediation reduction of emissions per unit of production, in particular including its final consumption, is compensated through methane emissions in the upstream, processing and LNG carbon offsetting. A carefully selected portfolio In 2020, the young of valuable fish species were released 304‑2 segments as well as greenhouse gas emissions reduction of emission compensation projects includes wind into the rivers of the West-Siberian (within the Khanty- In 2020, a total of 317 ha of land was returned to in upstream and LNG. Moreover, the Company intends to generation projects in developing countries. The emission Mansiysk and Yamal-Nenets Autonomous Regions) and landowners within the Company’s license areas, including improve its APG utilization rate as well as waste disposal compensation projects were certified in accordance Northern (the Murmansk Region) Fishing Basins. A total 116 ha of unused forest land and 201 ha of remediated land. and utilization. with the international VCS standard (Verified Carbon of more than 3 mln juvenile fish were released1: Red- Standard). Book Siberian Sturgeon (Acipenser baerii, about 571,000); During the reporting period, land remediation mostly muksun, a Coregonus species with shrinking population focused on areas disturbed by construction and followed 102-12 As part of NOVATEK’s long-term strategy, the Company whose fishing in the West Siberian Fishing Basin is prohibited previously approved engineering and design solutions. The Joining the Methane Guiding plans to build a network of fueling stations in Europe to (Coregonus muksun, about 1.22 mln); as well as Atlantic bulk of land (about 117 ha in total) was restored for forests, Principles initiative provide freight transport with clean fuel at key transport salmon (Salmo salar, about 21,000); broad whitefish and about 84 ha were restored for agricultural use. connecting points between Germany and Poland. At the (Coregonus nasus, about 1.25 mln); and peled (Coregonus In 2020, NOVATEK joined the Methane Guiding Principles, end of January 2021, the Company owned a network of peled, about 3,000). Large numbers of fish pre-approved Conservation of gene pools one of the most important global oil and gas initiatives 9 LNG fueling stations as well as 21 regasification units on by the Federal Agency for Fishery are released every year of ecosystems towards climate neutrality and low-carbon economy. A the European market. into water bodies of importance for the fishing industry package of practices and procedures to record, monitor for artificial reproduction of aquatic biological resources. For the purpose of preserving the genotypes of rare and and reduce methane emissions from hydrocarbon Compensatory The young of the above aquatic biological resources are endangered plant species listed in the Red Data Books production, processing, transportation and storage will fish stocking raised by several hatcheries: Murmansk branch of Chief of the Russian Federation and the Murmansk Region, be implemented under this initiative. Corporate reporting Basin Administration for Fishing and Aquatic Biological all Rhodiola rosea and Alchemilla alpina were manually documentation will also be prepared and disclosed under In 2020, artificial reproduction of aquatic biological Resources Conservation, Tyumen branch of the Russian transplanted from the LNG transshipment terminal the initiative. resources by releasing fish into important fishing water Federal Research Institute of Fisheries and Oceanography, construction site on the shore of Ura Bay of the Barents bodies focused on the West-Siberian (within the Khanty- Yugorsk Fish Hatchery, and Sobskiy Fish Hatchery. Due to Sea to a greenhouse in the botanical garden of Avrorin Mansiysk and Yamal-Nenets Autonomous Regions) and the protected status of the West Siberian subspecies Polar Alpine Botanical Garden and Institute (PABGI) under Reduction of GHG emissions Northern (the Murmansk Region) Fishing Basins. Several Acipenser baerii, the young of sturgeon are released in the Kola Science Centre of the Russian Academy of by APG injection subsidiaries were involved in releasing the juvenile fish accordance with permits issued by the Federal Service for Sciences. The work was completed by PABGI specialists of Siberian sturgeon, salmon and whitefishes (including Supervision of Natural Resources. under Permit of the Federal Service for Supervision Deep reinjection of APG to enhance oil recovery from the muksun) into the water bodies to re-stock these of Natural Resources No. 113 dated 15 October 2020, Yarudeyskoye field cut our GHG emissions by 1.2 mmt of commercially important fish. A total of more than 3 mln 8 Compensatory reforestation of burnt areas and and witnessed by representatives of the Baltic-Arctic CO2 equivalent – a major environmental benefit achieved juvenile fish were released . felling sites not resulting from the Company’s Interregional Administration of the Federal Service for through reinjection of over 357 mmcm in 2020. activities Supervision of Natural Resources and NOVATEK – Western Arctic2. Transplanted plants augmented the PABGI’s Reforestation Compensatory reforestation sites (mostly thin forests and nursery collections and will be cultivated to reproduce burnt areas) were selected by local forestry authorities, both rare species. Company contribution to the Ecology 2020 saw the first reforestation by the Company on land national project plots selected for compensatory reforestation (mostly thin forests and burnt areas). Seeds and planting stock 304‑4 The start-up of a small-scale LNG plant in Magnitogorsk, were obtained from the plant nurseries of the Khanty- Animal species included in the IUCN Red List with 5. Least concern (LC): 30 (beluga whale, grey seal, Chelyabinsk Region, in 2020 was one of the highlights for Mansiysk Autonomous Region and the Sverdlovsk Region. habitats affected by the Company operations: Eurasian teal, great black-backed gull, common gull, the Russian fuel market and marked another milestone In 2020, reforestation in the Tarko-Sale forestry area black guillemot, glaucous gull, great cormorant, in replacing diesel fuel with more environmentally friendly covered about 120 ha. 1. Critically endangered (CR): 0; common scoter, king eider, white-tailed eagle, and economical NGV fuel. The two largest cities of the European herring gull, black-headed gull, purple Southern Ural, Chelyabinsk and Magnitogorsk, participate 2. Endangered (EN): 1 (Siberian sturgeon); sandpiper, common raven, mallard, Eurasian wigeon, in the Clean Air project, which is part of the Ecology common shelduck, common merganser, red-breasted national project. The new LNG project will help them 3. Vulnerable (VU): 6 (polar bear, long-tailed duck, Steller’s merganser, European shag, little gull, Arctic tern, achieve targets for reducing road transport emissions. eider, snowy owl, black-legged kittiwake, velvet grey plover, golden eagle, gyrfalcon, whooper swan, scoter); peregrine falcon, muksun, Arctic char).
4. Near threatened (NT): 4 (Eurasian oystercatcher, Total species – 413. 4. Details on achievements in fighting climate change are available in the Climate Change section, pp. 83. common eider, pallid harrier, yellow-billed loon); 5. Details on the targets are available on NOVATEK’s official web-site at https://www.novatek.ru/en/development/targets/. 6. Novatek Polska prior to 3 February 2020. 7. The term “carbon-neutral” means that Novatek Green Energy compensated for the amount of greenhouse gas emissions from the 1. The calculation is based on 100% Company’s share in joint ventures. following scopes: upstream transport of LNG from the supply source at LNG terminals in Europe to the fueling station, fueling station 2. Arctic Transshipment after 19 March 2021. operations and the final consumption of LNG by end-customers. 3. The list is open as the Group continually expands the geography of its operations and the status of some species changes from time to time. 8. The calculation is based on 100% Company’s share in joint ventures.
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In 2020, the Company approved the Procurement Supplier Code of Conduct for NOVATEK Group suppliers. NOVATEK expects that its suppliers should comply with the principles of business transparency and integrity, business ethics and sustainable development included in the Code.
78 % ~400 ~50,000 Total procurements from Local suppliers engaged at People of manufacturers’ personnel Russian suppliers NOVATEK LNG Construction employed at NOVATEK LNG Construction Center Center
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Procurement and Supply Chain The supply chain management is also closely linked Requirements for suppliers The Supplier Code of Conduct can be found on our official Management with other related processes at the Company, such as website. contract management and budgeting. Our requirements for potential suppliers and items to be procured ensure unbiased evaluation of all tenderers Before signing a contract, we inform our counterparties 102‑9 and tenders and minimize the risk of non-performance about this Code and its compliance-related expectations. Procurement, an essential pillar of NOVATEK’s supply Procurement procedure (improper performance) of the contract.Yamal-Nenets 23% Male Autonomous Region Female chain, keeps our operations running with zero downtime. 40% NOVATEK’s experts conduct on-site audits to verify the We annually procure a significant amount of goods and NOVATEK’s procurement process gives subsidiaries and We favor original equipment manufacturersOther regionsor companies compliance of a tenderer’s occupational health and services and engage many contractors. joint ventures the authority to purchase the bulk of goods holding a valid dealership certificate over unauthorized safety (OHS) management systems with international 16,821 and services at their own discretion with overall oversight dealers. people standards, Russian laws, and NOVATEK’s internal NOVATEK’s procurement activities comply with Russian from NOVATEK’s headquarters, reserving centralized regulations. If there are any issues found by our audits, laws and the Company’s local regulations, in particular, procurement for highly critical and expensive items to NOVATEK uses the following60% criteria to evaluate tenders a tenderer is to fix these issues and provide NOVATEK with the Regulations on Organizing and Holding of save through bulk buying. and award the contract: with evidence. Failure to do77% so will result in a tender being Competitive Tenders at NOVATEK, our core procurement rejected from the NOVATEK’s procurement process. document. Our uniform procurement policies and The procured items include piping, Christmas trees, • cost and quality of the goods and services; compliance principles are shared throughout NOVATEK, its subsidiaries valves, rotating (compressors, gas compressor units, of the goods with technical requirements, and the total Our contracts also include the OHS requirements for any and joint ventures. pumps, motors and engines) and static (heat exchangers, cost of ownership of the goods tendered; supplier to comply with. tanks) equipment, instrumentation and control systems, NOVATEK’s procurement centers around the following structural metallic products, various materials, to name a • delivery time for the goods and services; principles: few. 11% Under 30 Supplier10% relations Permanent 15% • availability of tangible fixed assets, required30 to 50 equipment, Fixed-term • equal treatment, non-discrimination, and respect for NOVATEK favors open competitive tendering where any along with engineering and blue-collar50+ staff; NOVATEK is committed to building strategic, long-term fair competition among tenderers; tenderer may bid for the goods or services pursuant to and mutually beneficial relations with its counterparties the terms and procedure set by the Company. • track record in similar projects supported by references through unbiased and fair practices that seek to benefit • transparency and integrity of procurement-related and specifically with NOVATEK affiliated companies and all parties involved. information; We post tenders through an e-marketplace to ensure other industry leaders; and transparency and offer equal opportunities to tenderers. Building a pool of key suppliers is high on the agenda in our • compliance with NOVATEK’s business ethics and anti- The details for some tenders are also posted on • solvency and business reputation. Company. NOVATEK’s key suppliers are:
corruption requirements; NOVATEK’s website, or a website of our subsidiary/joint 90% 74% venture. Contracting at NOVATEK, including through collegial • manufacturers of materials and equipment strategically • cost-effective procurement of goods and services for bodies, is subject to the relevant regulations to make important to the Company’s operations and investment the purposes intended and in strict compliance with the For tenders invited through an e-marketplace, all sure every effort is made to have tenders and tenderers programs, including in terms of supply volumes and requirements for quality and lead time; and relevant details are provided to tenderers through an dealt with according to a transparent, fair, and impartial items criticality; and e-marketplace operator in line with its policy. If there are procedure. • long-term cooperation with key partners. changes to the tender conditions, notice is given to all • suppliers appointed by the licensors of technologies tenderers at the same time to ensure they all have an To ensure a supplier performs its contract obligations used at the Group’s facilities. Our supply chain management system is an integrated equal opportunity to revise their tenders. properly18% and in a timely manner, NOVATEKMale conducts 30 to 50 process covering procurement planning, inventory a thorough pre-qualification of tenderersFemale in terms of The24% Company seeks to expand its pool50+ of counterparties management, pre-qualification of tenderers, evaluation Tenders are evaluated by a cross-functional team of solvency, track record and expertise, reputation, required through regular market research to attract new of tenders and contract award, contract quality and experts who do not influence each other’s opinion. production capacities and human resources, as well as manufacturers and maintain the necessary level of milestone management (including expediting, during- quality systems241 in place. competition. production inspections, delivery receipt, checking the All tenderers are granted equal access to the relevant people necessary permits, and incoming inspection), and control data about the tender conditions, procedures, and NOVATEK uses internal controls, such as segregation NOVATEK’s supplier portfolio is continuously expanded of inventory transactions. closing date. of duties and a cross-checking system, to avoid unfair through evaluation of tenderers in terms of having practices in the procurement process. production capabilities 76%to meet our product 82% specifications. If any issues are brought out by the Procurement overview On top of that, NOVATEK applies zero-tolerance approach evaluation, potential suppliers are given feedback to to illegal activities of potential counterparties (for improve their production processes. Internal needs example, corruption, collusion, unfair competition) and assessment Inventory avoids unreliable contractors. Driven by high ethical Our regular open forums for suppliers and contractors for procurement management standards and principles related to transparent and fair keep the market up-to-date on our capital construction planning business 4%practices,3% as well as our commitmentExploration to and building production plans, outline the key requirements for potential a sustainable6% supply chain, in SeptemberLNG 2020, production NOVATEK contractors, and attract qualified, well-equipped and
adopted7% the Supplier Code34% of ConductMarketing that defines experienced counterparties to NOVATEK’s projects. Pre-qualification Evaluation of tenders our expectations and recommendationsProcessing for suppliers of tenderers and contract award in terms of compliance with human rights,Power business supply To keep our employees and suppliers healthy and safe 8% ethics (including the principles of the UnitedAdministrative Nations personnel amid surging COVID-19, in 2020, NOVATEK used virtual Global Compact, International Labor Organization,Transportation ILO communications to discuss priority issues with suppliers Contract quality Declaration on Fundamental Principles Auxiliaryand Rights production at instead of face-to-face meetings. Control of inventory 13% and milestone Work, and applicable environmental and industrial safety transactions management legislation), HSE principles,25% and workers’ rights (including avoidance of child and forced labor).
114 115 Strategic level
Reports to Risks of Board of Directors Audit Committee emergencies and incidents
Tactical level Environmental Reports to Reports risks THINK GREEN. THINK NATURAL GAS. Performance evaluationSustainability Report 2020
Chairman of the Reports to Internal Management Board Audit Division Procurement Performance Import Substitution A significant amount of local content wasConduct used by The first domestic large-capacity cryogenic pump was NOVATEK for our NOVATEK-Murmansk’s LNGrisks Construction successfully tested at the Yamal LNG project in December 204‑1 NOVATEK seeks to support local producers through Center and the ongoing LNG projects Arctic LNG 2 and 2020. This pump was designed and manufactured In 2020, NOVATEK procured RR 707 bln worth of goods favoring products and services of Russian origin if they Yamal LNG Train 4, as showcased below: by Afrikantov OKB Mechanical Engineering (an Organizational and operational level and services, most of which came from the companies meet technical requirements and are competitively priced Atomenergomash affiliated company). The pilot testing registered in Russia (78% of the total). vs. imported counterparts. Therefore, we are pursuing a • about 400 suppliers; Social took place at the Yamal LNG’s operating tank farm, with policy of import substitution of foreign technologies and Risk identification and assessment risks the plant running at its design capacity. equipment through: • about 50,000 people of manufacturers’ personnel; and Reports to NOVATEK’s procurement breakdown in 2020 Management Board Risk Control Division A St. Petersburg-based joint venture, set up by Linde AG • investments in setting up our own LNG production • orders for the main types of materials and equipment (Germany) and Severstal, localized the production of coil- technologies and capacities to manufacture totaling: wound heat exchangers for large-scale LNG projects. Local suppliers Other liquefaction trains; – about 1,800 items of equipment; risks The heat exchanger for the third train of Arctic LNG 2 is 22% Foreign suppliers Business units – pipe weighing over 300,000 tons; currently being manufactured. • proactive work with federal executive authorities and – structural metallic products weighing over contribution to the efforts of cross-functional working 200,000 tons; and groups to localize the production of technologies and – reinforcing bars weighing over 200,000 tons. equipment in Russia, including through the government support mechanisms; and 78% Board of Directors Recommendations on current • systematic work with local and foreign manufacturers approves climate change initiatives sustainability trends, to foster technology transfer and drive the local including climate change production of equipment and materials for LNG projects.
Remuneration and Nomination Committee Supreme governance body Revision with a sustainability function General Meeting of Shareholders Commission oversees climate change matters on behalf of the Board of Directors
Strategic governance body Board Committees Board of Directors Deputy Chairman of the ESG matters Deputy Chairman of the Management Board – Management Board Operations Director Remuneration (Sustainable Strategy Audit in charge of the Integrated HSE Management System (IMS) and Nomination Committee Committee development) Committee Chairman of the Management Board Internal Audit Division Collegial executive body Gas and Condensate HSE Department Director for Investor Relations Management Board Production (GHG emissions, APG) Alternative Energy Department and Processing and Offshore (Sustainable Department Technologies development) Corporate Business Board of Directors (Energy efficiency) (Alternative energy) Secretary units
Independent Board of Directors members
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In 2020, NOVATEK provided Social Investments considerable assistance to municipal healthcare facilities in six regions providing the necessary equipment, reagents and medical supplies to local diagnostic laboratories. NOVATEK financed the purchases of a total of 400,000 pieces of equipment, materials and tests and about 3.5 mln PPE items.
4.1 RR bln 0.7 RR bln 1 ,590 children Social expenses and Spent in regional support in their Received medical aid as part of the compensatory payments COVID-19 response efforts Company’s charity program
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NOVATEK’s social policy is aligned with the needs and 203‑1 traditional ways of life, protect ancestral lands and demands of local communities and beneficiaries. In 2020, the Company supported the following infrastructure preserve cultural traditions: children Focus, consistency and effectiveness are all major initiatives across the Yamal-Nenets Autonomous Region: considerations in the Company’s social investments • Corporate social responsibility policy; and efforts. When implementing social and regional • repairs and improvements to social infrastructure development programs, the Company strives to build facilities, sports institutions, and pre-school • HSE policy; 457 long-term relationships with partners. educational institutions; • Human rights policy; Received medical help of the In 2020, three business units were responsible for • repair of the sewage pumping station facilities in leading doctors in six cities as managing corporate social responsibility matters Tarko-Sale; • Business ethics policy; at NOVATEK – the Public Relations Department, the part of the “Health Territory” Budgeting and Efficiency Management Department, and • construction of modern children’s playgrounds; • Stakeholder engagement plan; project the Social Development Department. • purchase of waste incinerators, solar panels and mobile • Regulations on the Advisory Board; 203‑1 solar power plants; and In 2020, NOVATEK allocated RR 4.1 bln to charity projects, • Indigenous peoples of the Far North engagement guide; energy sources (for example, electric generators) and cultural and educational programs, and support of the • adaptation of residential space and public property in transportation services (fuel and lubricant supplies, air indigenous peoples of the Far North. apartment blocks to meet the needs of people with • Plan to promote the sustainable development travel); reduced mobility in the Yamal-Nenets Autonomous Region. of indigenous peoples; • providing nomadic communities with access to modern To improve social conditions of local communities, the • Regulations on hiring members of indigenous peoples infrastructure (the ability to receive quality medical Contribution to Russian Regions Company provided assistance to low-income families, of the Far North by Yamal LNG and contractors; care and purchase essential goods in Sabetta); Development people with disabilities, the elderly, veterans, severely ill children and children with special needs, as well as people • Stakeholder query handling procedure; and • organizing and staging traditional ethnic festivals and in financial distress. mass cultural events in the Yamal District; 203‑1 203‑2 OG9 • Shift camp management policy and plan. NOVATEK enters into agreements with the regional 203‑2 • support for vulnerable groups within the indigenous governments across its footprint to implement Since 2020, together with the Government of the Yamal- These policy are aligned with the following international communities (the elderly, large and low-income programs for improving local infrastructure, promoting Nenets Autonomous Region, NOVATEK has been supporting human rights and freedoms instruments: ILO Conventions families) – provision of goods, food, medicines, firewood; living standards and preserving distinctive cultural “Teacher for Russia”, a unique program to bring graduates No. 169 “On Indigenous and Tribal Peoples”, No. 87 “On identity of indigenous peoples of the Far North. of Russia’s leading universities to small regional schools Freedom of Association and Protection of the Right to • support for reindeer herding (installation of reindeer Under the agreements signed with various regions, and provide teacher training for young talent. The Organize”, No. 98 “On the Right to Organize and Collective crossings, fuel supplies); the Company was investing in the Yamal-Nenets and program promotes equal educational opportunities for Bargaining”, No. 29 “On Forced Labor”, No. 105 “On Khanty-Mansiysk Autonomous Regions, and Tyumen, children in different regions of Russia. Seven participants Abolition of Forced Labor”, No. 138 “On Minimum Age”, • development of indigenous children and youth (tuition Chelyabinsk, Leningrad, Murmansk and Kostroma Regions of the Teacher for Russia program moved to the Yamal- No. 182 “On Worst Forms of Child Labor”, No. 100 “On Equal assistance, celebrations, gifts); and throughout 2020. Nenets Autonomous Region to teach in local schools for Remuneration” and No. 111 “On Discrimination (Employment the next two years. and Occupation)”. • support for non-governmental organizations Importantly, during the COVID-19 pandemic, NOVATEK representing the interests of indigenous communities. joined in the local efforts to address regional problems, The Company provides funds to help the indigenous The Company is extensively involved in the life of with considerable assistance provided to municipal peoples of the Far North to enroll in training programs indigenous peoples of the Far North, closely working In 2020, funding for the activities under the Plan to healthcare facilities in the Chelyabinsk, Kostroma and matched to the employment needs of energy companies with the Yamal-Nenets Autonomous Region Government, Promote the Sustainable Development of Indigenous Murmansk Regions, the Yamal-Nenets Autonomous and the Yamal District community, as well as supports municipal authorities, NGOs of indigenous peoples of the Peoples was provided through the Yamal District Region and the Kamchatka Territory. The Company helped young talent among the local indigenous peoples of the Far North, and nomadic families engaged in traditional Grassroots Movement of the Indigenous Peoples of the provide the necessary equipment, reagents and medical Far North. economic activities within the Company’s footprint. Far North, with some of the activities supported through supplies to local diagnostic laboratories. In 2020, NOVATEK Every year, the Company has entered into agreements direct financing. financed the purchases of a total of 400,000 pieces of with the municipal administrations and the Yamal-Nenets equipment, materials and tests for healthcare facilities; Support of the indigenous peoples Autonomous Region Government to address the issues In 2020, as part of cultural heritage sites preservation, 55 ventilators and 2,000 non-contact thermometers were of the Far North related to supporting traditional ways of life, protecting the Company allocated funds to carry out supplied; and about 3.5 mln PPE items (protective suits, ancestral lands and preserving cultural traditions of archaeological protection measures at the Taz Metal medical masks, shoe covers and gloves) were purchased. 203‑1 203‑2 OG9 indigenous peoples of the Far North. Casting Workshop cultural heritage site, as well as to The Company also repaired the Murmansk regional The Company’s projects, including the Yamal LNG project, financing the Limbya Nomad Camp. hospital and supplied it with more than 100 additional affect the interests of indigenous peoples of the Far As part of the Yamal LNG project, NOVATEK’s efforts to hospital beds. North. NOVATEK carefully analyzes the project’s potential support indigenous peoples of the Far North are mostly In its engagement with indigenous peoples of the Far negative impact and makes every effort to minimize concentrated within the “Plan to Promote the Sustainable North, the Company considers the requirements of it. At the same time, the Company makes a significant Development of Indigenous Peoples through the Yamal a number of international human rights instruments, Yamal-Nenets Autonomous Region contribution to sustaining the livelihoods of indigenous LNG Project for 2019–2023”1. In 2020, these efforts were including: development peoples of the Far North and maintaining their traditional focused on the following activities: ways of life and cultural traditions. • Provisions of ILO Convention No. 87 “On Freedom of The Yamal-Nenets Autonomous Region is the core region • support for nomadic communities’ traditional ways Association and Protection of the Right to Organize” for the Company’s operations, which is why most of our Yamal LNG has developed and successfully implements of life, including the provision of necessary goods, are reflected in the Company’s Collective Bargaining efforts are concentrated in this region. NOVATEK strives a number of policies and regulations to promote the to be actively involved in addressing the problems of local sustainable development of indigenous peoples of the 1. Details on the “Plan to Promote the Sustainable Development of Indigenous Peoples through the Yamal LNG Project for 2019–2023” communities in the Yamal-Nenets Autonomous Region. Far North and safeguard their rights to maintain their are available in NOVATEK’s Sustainability Report 2019, pp. 104–105.
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Agreement, and are also regulated by the Labor • ILO Convention No. 100 “On Equal Remuneration Support for Cultural Institutions With the support of the All-Russian Federation of Code of the Russian Federation. In particular, Yamal (“Concerning Equal Remuneration for Men and Women DanceSport and Acrobatic Rock’n’Roll, the relevant LNG set up a Workers’ Council to facilitate collective Workers for Work of Equal Value”)” is implemented In 2020, NOVATEK strengthened its ties with Russia’s corporate sports clubs continued their activities in the bargaining on social and labor relations and conclude through by the Labor Code of the Russian Federation largest cultural institutions focusing on exhibition and Company’s regions of operation. In the reporting period, collective bargaining agreements by holding staff and is fully complied with by NOVATEK. educational activities, namely: the State Russian Museum, NOVATEK continued cooperation with the Russian Football general meetings and voting; the State Tretyakov Gallery and the Moscow Museum of Union as the General Partner of the Russian National Modern Art (MMOMA). As most museums were closed due Football Teams. The Company supported women’s • Provisions of ILO Convention No. 98 “On Right to Educational Programs to the pandemic, online lectures and meetings, as well as volleyball club Dinamo (Moscow) and the NOVA Volleyball Organize and Collective Bargaining” are reflected in virtual tours of museum halls were offered: Club (Novokuybyshevsk). the Company’s Collective Bargaining Agreement and 203‑1 203‑2 are also regulated by the Labor Code of the Russian NOVATEK runs educational programs in its regions of • In September, NOVATEK participated in Russian Creative Federation; operation on an ongoing basis to help children, young Week by supporting the educational program dedicated Charity and Philanthropy people and teachers on the one hand, and on the other, to arts; • NOVATEK fully complies with ILO conventions on forced to attract talent for the Company, building NOVATEK’s The Company provides assistance to a range of and child labor and discrimination – the Company does talent pool to support our future growth. • In a new environment, the Seventh Moscow International organizations and beneficiary groups in accordance with not use forced or child labor; and Biennale of Contemporary Art was held with the support its Charity Policy. Despite COVID-19 restrictions, NOVATEK of the Company; continued to provide charitable assistance and support to social projects while following all safety precautions and • MMOMA teamed up with NOVATEK to hold Pavel Leonov: protocols as recommended by Rospotrebnadzor. Natural Science Center In February 2020, the Natural Science Center became Through the Looking Glass, a retrospective exhibition a regional platform for an offline qualifying round for marking the 100th birthday of the artist; The key focus area of the Company’s charitable efforts As part of NOVATEK’s Gifted Children program, the April Chemistry Education Program at the Sirius is health and medical treatment facilitation, with children the Natural Science Center was opened in 2018 to Educational Center. • MMOMA also organized Countdown, a retrospective being the key beneficiary group. 1,590 children benefited provide a stimulating environment for children aged exhibition of Moscow Conceptualism leaders Igor from the Company’s charity program in 2020. 5 to 18 in Tarko-Sale, Khanymey and Purpe to develop In 2020, the Natural Science Center hosted Umnicum, an Makarevich and Elena Elagina; their intellectual and academic potential. In 2020, online industry-specific summer school. Umnicum offered In 2020, the Company continued the “Health Territory” 575 students received training at the Natural Science three training programs – A Journey to the World of • The Russian Museum hosted the Knowledge Is Power project, a joint initiative with the Pirogov Russian Center. Science, Chemistry Explorers and Chemistry School. exhibition dedicated to book publishing and educational Children’s Clinical Hospital of the Russian Ministry of posters and highlighting the history of education in Health. This project is aimed at providing highly qualified A total 22 further education programs and 30 In June and October 2020, the Natural Science Center Russia in the early 20th century; and medical assistance to children in desperate need of personalized learning pathways in natural science and hosted a Virtual Tour of the Mobile Technology Park. treatment and developing healthcare services in the technical subjects are offered by the Natural Science • NOVATEK remained a General Partner of the Moscow Company’s regions of operation, as well as launching Center. Programs include solving of contest problems The Occupational Tryouts Laboratory program is run in Soloists Chamber Ensemble led by Yuri Bashmet. medical education programs, providing advanced training and advanced problems and training of pupils for cooperation with NOVATEK-Tarkosaleneftegas. to local health professionals, fitting out partner clinics national contests and competitions. In addition, the with new high-tech equipment, to name a few. students do research projects on topics relevant to the In 2020, under a cooperative agreement with the Vernadsky Promotion of Sports Yamal-Nenets Autonomous Region. State Geological Museum of the Russian Academy of In 2020, under the project, leading doctors from Sciences, four videoconference lectures were hosted on Programs developing mass and high-performance the Russian Children’s Clinical Hospital visited six Through cooperation with the Distance Education today’s environmental agenda featuring professors from sports are an important focus area on NOVATEK’s social cities – Tarko-Sale, Novy Urengoy, Kostroma, Chelyabinsk, Center at the AESC MSU (Moscow), the Natural Science the Institute of Energy Strategy, the Vernadsky State agenda. The Company regularly holds tournaments in the Magnitogorsk and Petropavlovsk-Kamchatsky. As a Center runs the Collective Student educational program Geological Museum of the Russian Academy of Sciences, most popular, mass sports, such as football, volleyball, result, a total of 457 severely ill children were provided in chemistry, biology, physics and mathematics. the Gubkin Russian State University of Oil and Gas. swimming and skiing. In 2020, tournaments were held in full with medical support, and 97 children were taken to the compliance with the requirements of the Russian Federal Russian Children’s Clinical Hospital and other federal Service for Surveillance on Consumer Rights Protection medical centers. During examinations and consultations and Human Wellbeing (Rospotrebnadzor). by the Russian Children’s Clinical Hospital visiting teams, 413-1 all necessary safety protocols were implemented, with the Educational programs1 In 2020, NOVATEK continued to support children and youth Company also providing the children, parents and doctors sports in its regions of operation. Specifically, it supported with personal protective equipment. Program 2020 Highlights the pilot federal innovative project “Become a Champion”, focused on helping children uncover their sports potential. The Company runs the “Targeted Therapy” project, Gifted Children • 110 children are enrolled in the program a cooperative effort with the Science for Children • Spending under the program amounted to RR 16.2 mln In 2020, NOVATEK hosted its Step to Bigger Football Indoor Foundation established at the initiative of leaders Two grant programs: • 59 grants were awarded to school students in 2020 (1,715 grants since the program launch) Football Cup for secondary school teams. Due to the and researchers of the Dmitry Rogachev National Grants for Schoolchildren • 6 grants were awarded to teachers in 2020 (91 grants since the program launch) COVID-19 situation in Chelyabinsk Region and Kamchatka Research Center of Pediatric Hematology, Oncology and and Grants for Teachers • Spending under the program amounted to RR 377 thousand Territory, the competition had to be postponed to a later Immunology. The project aims to help children with brain NOVATEK-University • 112 student contracts were signed date. Based on the results of the 2019 cup, futsal courts and central nervous system tumors, and is focused on • 11 students completed internships at the Company under the program were built and equipped for the winning teams – three in studies of the molecular and genetic characteristics • 4 program graduates went on to be employed by the Company in 2020 (100 graduates since the Chelyabinsk Region and two in the Kostroma Region. of cells underlying their malignant transformation, and the program launch) selecting personalized treatment for each little patient. • Spending under the program amounted to RR 27.1 mln The Company continued to support the Student In 2020, 120 children received help through this project. Basketball Association. Some of the competitions could not be held in person amid COVID-19 restrictions, and 1. Details on the ongoing employee training and development programs are available in NOVATEK’s Sustainability Report 2019, pp. 106–107. online tournaments and events were held instead.
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As part of its assistance program for the elderly run In 2020, as before, the foundation’s activities focused Telemedicine Center • participation of regional partner clinics in the conferences jointly with the Enjoyable Aging Charity Foundation, care on three areas: 1) financial assistance, 2) moral and hosted by the Russian Children’s Clinical Hospital; services were paid for lonely elderly people, household psychological support for veterans, and 3) cultural and NOVATEK’s social project “Telemedicine Center” (TMC) appliances and furniture were purchased. recreational events. is building a unified telemedicine network linking the • training programs, master classes, and lectures for project’s partner children’s hospitals in the Company’s doctors at regional partner clinics; and In 2020, the Company’s quarterly financial support regions of operation with the Multimedia Telemedicine Aid to veterans provided to each of the foundation’s retirees amounted Center of the Russian Children’s Clinical Hospital. The • access to live broadcasts of surgeries for regional clinics. to RR 6,930, with a total of RR 33.2 mln allocated by project’s social purpose is to provide medical assistance The Company supports the NOVATEK-Veteran Social NOVATEK during the year to finance the foundation’s to children in desperate need. The project’s footprint In 2020, 626 video consultations were hosted by the TMC. Protection Foundation in the Purovsky District of the activities. spans the country’s entire territory from Murmansk to Yamal-Nenets Autonomous Region, which had 803 retirees Kamchatka. In December, a series of lectures on pediatric registered as of the end of 2020. The foundation provides anesthesiology and intensive care was delivered. assistance and support to labor veterans who for years The unified telemedicine network not only enables Furthermore, the TMC held regular online meetings and have worked in the oil and gas industry in the Far North. connecting regional clinics to the Russian Children’s case conferences with relevant experts of the Russian Clinical Hospital but also allows them to link to each other Children’s Clinical Hospital. and any clinic anywhere in the world. In 2020, the work under the TMC to equip and connect The project addresses a number of challenges in the hospitals in Novy Urengoy, Tarko-Sale, Murmansk Company’s regions of operation: and Kostroma to the unified telemedical network, was completed. In 2021, hospitals in Petropavlovsk- • access to medical consultations for seriously ill children Kamchatsky and Magnitogorsk are also going to be at regions’ requests; equipped and connected to the TMC. Currently, hospitals in these regions are connected to the TMC under a • holding case conferences; temporary arrangement, which also makes medical consultations possible.
During 2020, the Company also provided targeted Throughout 2020, NOVATEK traditionally supported the support and assistance to a number of various projects aimed at preserving and increasing rare animal beneficiaries: populations: Siberian tiger and Amur leopard.
• In cooperation with specialized kindergartens in Murmansk and Kostroma, assistance was provided to Corporate volunteering children with visual impairments, and vision protection rooms were equipped. In 2020, 159 children with visual In 2020, the Company’s “All Together” volunteer movement impairments, including those with disabilities, underwent continued its activities, with employee volunteers helping rehabilitation; children at orphanages, little patients suffering from various illnesses, lonely elderly people and disabled • Throughout the year, the Company provided targeted people. Some of the activities were moved online. support to industry veterans, orphans and disabled children, and people with disabilities; During 2020, within the Developmental Environment and Comprehensive Development programs, a string of • The Company at its sole cost purchased medicines and events were held for 65 students of the Gus-Khrustalnaya indoor air recirculation systems for the Children’s Social orphanage in Dubasovo, Vladimir Region through a Rehabilitation Center at the Trinity Church in Kolomna; cooperative effort with the DetskieDomiki Foundation.
• Assistance was provided to children with disabilities at From February to November 2020, classes were hosted for Dunno’s Town shelter-care facility in the Moscow Region the orphanage students from grades 5 to 9 to develop as well as Rodnik orphanage in the Ulyanovsk Region; social and life skills such as cooking, as well as offer occupational guidance and classes in creativity, crafts, • The Company allocated funds to the Mother and communication and first aid. Child Health Center in Magnitogorsk for purchasing equipment for the neonatal intensive care unit; In summer 2020, the orphanage canteen was renovated and equipped with new sets of crockery, cutlery, and • The Deaf-Blind Support Foundation Connection was furniture. A new commercial dishwasher was purchased, allocated funds to improve the quality of life of its care and hygiene rooms were also renovated. recipients; and In October, a renovated gym was reopened in an official • A muffle furnace was purchased for the Oktemsk ceremony at the Gus-Khrustalnaya orphanage. At the secondary school in Yakutia, which is used to offer gym, the lighting system was replaced and sports gear extra-curricular classes in firing ceramic products. was upgraded.
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NOVATEK’s personnel policy is based on the Employment Practices Company’s commitment to healthy and safe working conditions, decent and competitive salaries and the best opportunities for employee development, self-fulfillment and career growth.
1.6 RR bln 32 hours Expenses on targeted social Average training hours per programs employee
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Employee Profile 401‑1 102‑8 The Company keeps employee turnover rate low, averaging Profile of NOVATEK employees in 20201 102‑7 6% in 2020 (3% in the Yamal-Nenets Autonomous NOVATEK is a major employer and provides a large number Region)2, and hired 2,388 employees3. In the reporting year, of jobs: at the end of 2020, the Company’s headcount 919 employees left the Company (about 30% of them – Personnel structure by region, % Personnel structure by gender, % numbered 16,821 employees1, up 1,376 year-on-year, most low-skilled workers of marketing subsidiaries); 148 employees of whom (60%) worked in the Yamal-Nenets Autonomous went on parental leave, and 100 returned from the leave. Yamal-Nenets 23% Male Autonomous Region Female Region, the Company’s core region of operation. At 40% the same time, NOVATEK personnel’s minimum wage in Other regions its regions of operation is traditionally higher than the 16,821 local minimum wage, which is stipulated in the collective Motivation and KPI System people bargaining agreement. In addition, NOVATEK regularly indexes its salaries to offset inflationary impacts. The The KPI system in place at NOVATEK is simultaneously aimed 60% proportion of workers compensated based on wages at both maximum performance in delivering the Company’s 77% subject to minimum wage rules is insignificant. strategy and motivating respective key employees.
It is important for NOVATEK to be an attractive employer, The key objectives of the KPI system are to assess current so its personnel policy is based on the Company’s progress in achieving the Company’s long-term goals and commitment to healthy and safe working conditions; create drivers for efficient management decision-making. Personnel structure by age, % Personnel structure by type of contract, % decent and competitive salaries and other financial incentives; and the best opportunities for employee The Company’s KPI system is aimed at: 11% Under 30 10% Permanent 15% development, self-fulfillment and career growth. 30 to 50 Fixed-term • delivering on the Company’s Development Strategy; 50+ The Company has zero tolerance to any form of discrimination, including employee discrimination: in • continuously improving financial and operational recruitment, providing career opportunities, social performance; and benefits, and in any other aspects. Wage rates for women and men are based on equal pay structures at NOVATEK • motivating employees to achieve the Company’s priority for the specific type of work performed. objectives.
90% 74% Although the majority of the Company’s employees NOVATEK’s KPI system is based on financial, economic, and are male (77%), which is dictated by the nature of the industry-specific drivers. It also considers the Company’s Company’s operations, i.e. Far Northern geography and performance in sustainable development. The list of ESG rotation job arrangements, female employees have equal KPIs for the management comprises the effectiveness of 405‑1 opportunities for development and promotion. In 2020, the HSE Management System, including climate change Management breakdown by gender, % Management breakdown by age, % a woman was elected to NOVATEK’s Board of Directors management. for the first time, which was an important step towards gender balance on the Board. The Company’s KPI system includes corporate indicators 18% Male 30 to 50 based on the Company’s key objectives, and individual Female 24% 50+ The Company is interested in long-term employment and indicators based on the strategic objectives of a certain is willing to make all the related commitments: 90% of the manager. staff are hired under permanent employment contracts, 241 including 99% on a full-time basis. The share of part- The KPI system covers the Management Board and key people timers is marginal to the Company (below 0.5%) and is not executives. included in this Report. NOVATEK sources minimal services from freelancers or sole proprietors. 76% 82% KPI progress 202‑1 Compliance with the corporate strategy is a fundamental Internal needs Moscow Yamal-Nenets principle of the remuneration system, which is based assessment InventoryAutonomous Region on the balance between the fixed and variable parts Personnel structure by type of activity, % for procurement management of remuneration. The remuneration system uses KPIs Minimumplanning compensation of 41,753 31,038 developed in line with the Company’s strategic goals. 4% 3% Exploration and production NOVATEK’s personnel per 6% LNG production month as at the end of 2020 To calculate annual bonus payments for managers and 7% 34% Marketing Pre-qualification employees,Evaluation of the tenders Company analyzes progress against KPIs Processing Minimum wage as at the 20,361 of tenderers 17,707 and contract award following the annual performance analysis. The Budgeting Power supply end of 2020 8% and Efficiency Management Department conducts an Administrative personnel Transportation 1. Hereinafter (in the text and calculations behind the figures reported), this numberContract accounts quality for full-time employees with NOVATEK, its Auxiliary production Control of inventory 13% subsidiaries or joint ventures as their primary employer. and milestone transactions 2. The employee turnover rate is calculated as resignations divided by average headcount management at the year-end. Percentage is calculated as the resulting value multiplied by 100. 25% 3. The number includes only those employees who worked in the Company until the end of the reporting year.
128 129 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020 annual audit of performance against each annual corporate Interregional Research-to-Practice 404‑1 and individual KPI set for calculating annual bonus payments Conference Average training hours by gender in 2020 due to the management of NOVATEK and its subsidiaries. th In December 2020, Moscow hosted the 15 Interregional Male Female The remuneration of the Company’s executives is aligned Research-to-Practice Conference for the Company’s 1 with its long-term performance. To determine the amount young specialists attended by 86 employees from Employees 12,946 3,878 of their remuneration, NOVATEK uses a balanced KPI 16 subsidiaries and joint ventures. 65 projects were Total training hours 482,704 34,890 system based on the Company’s performance, including submitted at this event. All winners received cash awards, the impact on the long-term performance. with 12 top performers also granted an opportunity to Average training hours per employee 37 9 visit oil and gas and power supplying companies in Norway KPIs adopted by the Company to assess its top and the Netherlands. management: Average training hours by position in 2020 In 2020, NOVATEK’s subsidiary Yargeo was awarded a • fulfillment of gas production plans; Certificate of Merit for contribution to the innovative Average training hours per employee trained development of the energy industry at the International • fulfillment of liquid hydrocarbon production plans; R&D Contest of Technologies and Innovations for the Top managers 48.70 Development of Fuel, Energy and Mining Industries. Medium-level managers 48.93 • fulfillment of gas sales plans; White-collar employees 44.14 • fulfillment of liquid hydrocarbon sales plans; Corporate technical competency assessment system Blue-collar employees 53.84 • EBITDA; NOVATEK has in place a corporate technical competency • effectiveness of the HSE Management System assessment system which allows to monitor the 404‑2 (including climate change management); competence development of the engineering staff. Training and development programs2
• share of administrative expenses in the revenue; and The corporate technical competency assessment system is Program 2020 highlights aimed at: • proved reserves. Professional development The program covered 46.74% of white-and blue-collar employees. • recruitment of white-collar and blue-collar workers to fill program KPIs adopted by the Company to assess its medium-level vacant positions; In-house training program The program includes 13 courses, five of which were converted online in 2020: managers: • decision-making when promoting employees, increasing • General course of seismic exploration; • cost of debt; their salary or tariff rate; and • Design of field development in conditions of low knowledge; • Complexing GIS methods to address geological tasks. Basics of log interpretation and • net profit; • targeted professional development and technical training practical application (in NOVATEK’s projects); of engineers and blue-collar employees. • Complex interpretation of seismic and GIS data; and • reserve replacement rate; • Basics of hydraulic fracturing. The results of the employee technical competency Steps in Discovering Talents The program covered 98 young professionals from 11 subsidiaries. • reserve replacement costs; and assessment are considered when making decisions on program promotion or increasing salary or tariff rate. During the 39 young professionals graduated the eighth class under the program. • output growth. reporting year, 67 employees were tested when considered 18 new mentors were trained in “Mentoring culture”. for promotion to another position (category) or grade, and over 82% got promoted. Energy Summer School 3 young specialists from NOVATEK subsidiaries and joint ventures attended the Energy Summer School in 2020. Training and Development In 2020, for the corporate technical competency assessment system, Yamal LNG developed and obtained Corporate resource training In 2020, workshops involving representatives of the center’s trades were held. center in Tarko-Sale at Tarko-Sale Our employees’ professionalism is one of NOVATEK’s key approvals for 3,312 tests in the following areas: Necessary equipment and consumables for workshop courses in the following trades were Vocational School success factors, including in terms of sustainability. The purchased: instrument and automation fitter, electrical equipment fitter, and oil and gas Company implements a range of educational programs • vibration monitoring of pumps and compressors; production operator. to develop employees and provide opportunities to fulfill their career potential, as well as to create a quality • design and operation of basic plant equipment; Collaboration with Gubkin 8 masters of the first graduation class (2020) are employed by NOVATEK and its talent pool. In 2020, NOVATEK spent RR 51 mln on training University subsidiaries. programs for 7,500 employees. Average training hours per • design and operation of rotating equipment; 12 master students (2019–2021 enrollment) receive merit scholarships and have completed employee reached 32.4 hours. summer apprenticeships in the form of webinars and online meetings at affiliated • materials and metals; companies. Due to the coronavirus pandemic, in the second half of 2020, educational institutions and education providers • natural gas treatment and liquefaction technology; moved training online, so most trainings, seminars and professional development courses took place remotely. • production process safety (by production units); and
1. Report boundaries for employment differ from those for training and education, see Appendix 4. Report Boundaries. NOVATEK also provides employee training on personal • automated process control systems, instruments and 2. Details on the ongoing employee training and development programs are available in NOVATEK’s Sustainability Report 2019 development courses to enhance their individual skills. automation. on pp. 118–119.
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In 2020, the Group held the following trainings: NOVATEK’s social programs1
Training Number of participants Program Coverage, the Company’s expenses in 2020 Targeted compensation and social support payments RR 683.7 mln Effective manager (16 hours) 17 people State guarantees support 3,585 people (employees and their family members) Task execution management (16 hours, online) 17 people RR 85.7 mln Team management (16 hours, online) 17 people 403‑6 RR 236.4 mln Self-organization (16 hours) 37 people Voluntary health insurance for employees
Cross-functional interaction (16 hours) 33 people 403‑6 2,581 people Therapeutic resort treatment and rehabilitation RR 116 mln Presentations 10 out of 10 (16 hours) 41 people Pension program 1,202 people Value thinking (8 hours) 23 people RR 123.8 mln
Mentoring culture (6 hours) 29 people Rehabilitation of children with disabilities RR 6.5 mln
My career (4 hours) 28 people Repayable Financial Aid Program 122 people 41 families Moscow City business games (8 hours) 10 people RR 252.3 mln Modern management review of the Company’s business (16 hours) 10 people Cultural and sports events program RR 53.3 mln Skills for constructive business communication (12 hours) 18 people NOVATEK-Veteran Social Protection Foundation RR 33.2 mln
The Group’s total expenses on targeted social programs In 2020, NOVATEK’s social expenses to support employees • increasing the amount of monthly compensation for the Approach to labor organization in 2018–2020, RR bln amounted to RR 1.6 bln. care of a child up to three years of age (by 9%); All of the Company’s employees are informed about 1.8 • increasing compensations to high-skilled specialists for NOVATEK’s local labor rules and the Code of Business 1.6 housing rental in Tyumen and Novy Urengoy (from 6.2% Ethics, which stipulate the Company’s approaches 1.4 Effective Communication to 39.3%); and to labor organization. In particular, these regulations emphasize industrial safety, remuneration, non- • indexing monthly social benefits for retired employees discrimination, and personal data protection. The labor Interaction between management and (by 5%). rules also contain information on the working hours for employees discussing current issues the men and women working in the Far North, and the contact person to whom an employee may address any The Company has in place a system allowing its Trade union relations inquiries as regards the rules.
2018 2019 2020 employees to contact management, report emerging problems, and receive feedback on their review and Trade unions in place at subsidiaries unite 59.4% of NOVATEK has in place a procedure for conducting solution. Employee reports are discussed at meetings employees2 and are an important stakeholder of the inspections based on disciplinary offenses causing of subsidiary heads with NOVATEK’s Chairman of the Company. By cooperating with trade unions, the Company damage to, or losses for, the Company, and entailing civil Management Board. In addition, employees’ concerns is able to handle important matters of labor relations, or financial liability. Inspections are conducted to ensure 404‑3 are identified, studied, and reviewed during regular balance the social package, and defuse tensions through the comprehensive investigation of the circumstances, 37 24 2,537 In 2020, 201a total of 429 employees were tested within dedicated meetings with employees and managers. a constructive dialogue and timely feedback provided determine the amount of damage, identify responsible 2,365 145 Groundwater - 51% Production needs - 64% the corporate technical competency assessment Following these meetings, a list of issues is formed through discussions, meetings of trade union committees employees and the scope of their responsibility, and 2,040 Water bodies – 37% General needs - 26% prevent the offense from re-occurring. Following the Gas flare systems – 9% system, including 32 employees testedOther- at 10% recruitment, and later sent to dedicated departments to prepare and conferences. inspection, the employee that violated the requirements Third parties – 2% 67 employees at promotion, 330 employees under informed proposals on their solving. In 2020, NOVATEK of the Company’s local regulations is subject to Wastewater stabilization the regular testing to develop the Technical Training subsidiaries also held regular meetings that resulted As a result of the conscientious social partnership policy, disciplinary and/or civil/financial liability. ponds – 1% program. in proposals submitted to the Management Board. The the Company has never seen a single case of stoppages 630 532 Management Board resolved to introduce amendments or strikes due to labor disputes. to the Core Concept of Social Policy, the Core Concept 869 1,307 of Remuneration, and other local social and labor In 2020, the Company spent a total of RR 4.4 mln to
2018 2019 2020 Support to Employees regulations, effective from 1 January 2021. support trade unions.
For many years, NOVATEK has been traditionally In particular, the Management Board made several implementing a range of social programs to support the decisions in 2020 that have since been added to the Company employees, drive their strong personal and regulations for subsidiaries: professional performance, and help address other social issues. To ensure that support programs are targeted • indexing benefits upon retirement (by 3.33%); 1. Detailed description of NOVATEK’s social programs is available in NOVATEK’s Sustainability Report 2019, pp. 122-124. and effective, they are developed and implemented in 2. Calculation includes the companies with trade unions in place: PAO NOVATEK, Terneftegas, NOVATEK-Yurkharovneftegas, NOVATEK- cooperation with employees and trade unions. • indexing one-off vacation payments (by 4%); Tarkosaleneftegas, NOVATEK-Purovsky ZPK, NOVATEK-Transervice, Arcticgas, NOVATEK-Energo.
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In 2020, following the UN SDG 8 Employee Health, “Decent Work and Economic Growth” NOVATEK adopted a target Occupational Health to deliver a 5% reduction in LTIFR among employees every year. and Safety
29 % 0 0 Reduction of LTIFR among Fatalities among employees Occupational accidents employees
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Our Approach to Occupational management system and ensures risk management • provide employees with personal and collective protective Operational Control Health and Safety based on the key principle of prioritizing prevention equipment, wash-off and decontaminating agents; and over incident containment and response. The OHS OG13 403‑8 403‑9 management system rollout is the Company’s strategic • ensure the safe performance of contract work and the In line with the applicable industrial safety legislation, the 403‑1 and operational decision, while providing an environment procurement of safe products. Company carries out operational control at hazardous The health and safety of employees, as well as of to manage occupational health and safety (OHS) risks production facilities (HPFs), with each enterprise local communities that may be affected by NOVATEK’s and opportunities is its priority objective. The Company 403‑7 approving its operational control commission by its order. operations are a top priority for the Company. The is strongly focused on eliminating or minimizing OHS risks Company employees on secondments are also required Company’s occupational health management system is by taking effective preventive and protective measures. to strictly follow OHS standards in line with Articles Key operational control objectives at the HPF: based upon strict compliance with Russian laws, with the Certified entities of the Group actively migrate their 166–169 of the Labor Code of the Russian Federation. Company’s occupational health requirements applying to integrated OHS management system to ISO 45001:2018. Upon arrival to their destination, seconded employees • ensure industrial safety compliance at the HPF; all employees. receive an OHS induction briefing and are informed of NOVATEK’s OHS management system an annual the safety rules specific to their site, as well as provided • review the current status of industrial safety, including 403‑8 surveillance audit to ensure it is still compliant to with protective clothing, footwear and other personal by organizing necessary expert reviews; NOVATEK has in place an integrated occupational ISO 45001:2018. In 2020, all subsidiaries certified to protective equipment. Employees are not allowed to work health and safety management system (compliant with OHSAS 18001 (or ISO 45001:2018) successfully completed at a facility without completing relevant occupational • design initiatives to improve industrial safety and OHSAS 18001 or ISO 45001:2018)1, which is part of a wider a surveillance or recertification audit. health training. prevent environmental damage;
NOVATEK also keeps records of injuries among its • follow up compliance with industrial safety requirements 403‑3 contractors2. OHS requirements form an integral part set out in federal laws and other regulations; Key roles of NOVATEK’s Occupational Health and Safety unit: of agreements between subsidiaries and contractors. The agreements provide for penalties in case of breach • coordinate efforts aimed at preventing accidents at • monitor the OHS management system’s compliance • implement an effective system of responding to and of OHS rules by contractors. In 2020, the Company the HPF and ensuring preparedness to contain and with ISO 45001 across NOVATEK and ensure its preventing injuries and accidents at the Company’s implemented the Supplier Code of Conduct, which defines respond to accidents; effectiveness; facilities; and its expectations of suppliers’ OHS practices. • follow up compliance with certification and test • provide organizational and methodological support to • engage with federal and local authorities, non- 403‑4 schedules for various types of equipment used at the the Company’s industrial safety activities; governmental and non-profit organizations to discuss OHS issues are monitored by NOVATEK’s senior HPF, as well as schedules for repairing and calibrating industrial safety issues. management, and the Company’s OHS performance is instrumentation and controls; and reviewed by its Board of Directors3. The Remuneration The Company’s Occupational Health and Safety goals: and Nomination Committee of the Board of Directors • follow up compliance with process specifications. annually reviews the Sustainability Report, which gives minimize risks and prevent threats of industrial create comfortable working conditions for a clear picture of the Company’s OHS approaches and Operational control at HPFs is part of the industrial accidents and injuries to the workforce wherever employees to reduce the occupational disease performance. In addition, NOVATEK’s top management safety management system and is carried out through a achievable, given the Company’s current rate and the number of workdays lost; and holds regular conference calls on OHS issues with the range of measures aimed at ensuring safe operation of capabilities and resources; CEOs of subsidiaries and joint ventures. HPFs, as well as prevention of accidents at these facilities ensure that governance bodies, employees, and preparedness to contain and respond to accidents. comply with Russian OHS laws and aim to meet and emergency rescue teams are prepared Management of subsidiaries and joint ventures also pay relevant international standards and best to contain and respond to potential industrial particular attention to OHS compliance at their production The Company carries out two types of operational control: practices; accidents, fires and emergencies. sites. Employees, including blue-collar workers, are involved compliance with industrial safety requirements at HPFs and in the OHS risk assessment process and in discussing compliance with sanitary and epidemiological requirements. continuously improve the OHS management issues. Moreover, the employees involved in production system based on control and monitoring results, processes on a daily basis or periodically (as prescribed Annually, the Company develops plans for comprehensive as well as routine audits and regular reviews of by local regulations) monitor their working conditions and targeted inspections; based on the results of these the system’s effectiveness; including inspection of their workplaces, tools, accessories, inspections, reports are drawn and corrective actions are protective clothing, and collective protective equipment. If developed to timely eliminate any identified gaps. Within any non-compliance or hazard is identified, the employees the established timeframe, employees in charge submit 403‑1 403‑8 • organize and conduct special assessments of working notify their supervisor, and measures are taken to remedy corrective action reports to the OHS unit for further The occupational health management system operates conditions; the breach and provide safer working conditions. analysis of the risk of possible hazardous situations. as part of the integrated OHS management system. The main objective of deploying the occupational health • manage occupational risks; The Company participates in OHS-promoting initiatives 403‑9 management system at an enterprise is to move from and works on an ongoing basis to raise employee In 2020, subsidiary and joint venture commissions reactive incident responses to proactive management • organize and conduct employee health monitoring; awareness of OHS. conducted a total of 409 audits for compliance with of health risks to employees. industrial safety requirements, including integrated and • inform employees about working conditions at their Working conditions and OHS issues are included in targeted audits. The key focus areas of the Company’s occupational workplaces and occupational risk levels, as well as about collective bargaining agreements, which regulate labor health management system: the guarantees and compensations they are entitled to; relations with assistance from trade union committees. Operational control over the compliance with sanitary rules and the implementation of sanitary epidemic control • train employees in occupational health (briefings, training); • ensure optimal work and rest patterns for employees; In 2020, spending on OHS, fire safety and security at the (preventive) enable timely identification of breaches Group facilities totaled RR 2,436 mln. and immediate responses to them, which can prevent
1. 10 out of 23 (43%) NOVATEK’s subsidiaries engaged in hydrocarbon production, transportation and processing are certified to OHSAS 18001 (or ISO 45001:2018): PAO NOVATEK, NOVATEK-Yurkharovneftegas, NOVATEK-Purovsky ZPK, NOVATEK-Transervice, Yamal LNG, 2. Details on the number of accidents among contractor employees are available on p. 140. NOVATEK-Ust-Luga, Arcticgas, NOVATEK-Tarkosaleneftegas, Nortgas and Cryogas-Vysotsk. 3. Details are available in the Corporate Governance section on p. 58.
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injuries, occupational and infectious diseases or other accident or acute illness consequences and prevent a The following actions were taken during 2020: • a number of medical staff was increased at medical consequences of negative impact on employee health. fatality. units, including various specialists – pulmonologists, • shift duration was extended; cardiologists and infectious disease specialists; and Operational control covers buildings, structures, Emergency medical response plans are worked out process equipment, production processes, vehicles and for remote facilities of subsidiaries, joint ventures and • procedures for pre-shift observation were developed • Company’s employees returning from remote working or workplaces. In addition to occupational hazards, raw contractors to ensure emergency preparedness and timely for new rotation personnel arriving to production from vacation are required to take COVID-19 tests, and materials for the production of food products, semi- medical aid. These plans include first aid and follow-up sites as were logistics arrangements to transport the only those testing negative are admitted to work. finished products, finished food products, and potable care, timely evacuation, and regular drills to practice first- personnel, which enabled mitigating the risks of the water are also subject to operational control through aid skills. The requirement for contractors to have such coronavirus spreading into sites of operations; After all restrictions were lifted, the Company, among other laboratory testing. plans (even if they do not have their own first-aid posts) is things, provided an opportunity to work remotely to certain included as a special clause in relevant contracts. • for rotation personnel, temporary accommodation employee categories – people over 65, pregnant women and Medical activities to prevent infectious diseases along with medical observation and COVID-19 testing employees at risk of developing severe complications from (including hospital-acquired infections) are supported To secure the sanitary and epidemiological welfare at the was arranged; an infection due to underlying medical conditions1. by operational control of the compliance with sanitary facilities of NOVATEK subsidiaries and joint ventures, the epidemic control requirements and disinfection and Company monitors water supply and disposal, sanitary • systematic campaigns were organized to raise The concerted actions of the Company, its employees, sterilization protocols at first-aid posts and observation and hygienic condition of accommodation, industrial employee awareness of prevention of acute respiratory partners and authorities allowed us to provide our people and isolation facilities performing mandatory laboratory premises and public catering facilities, and waste viral infections, including COVID-19, alongside briefings with strong protection and maintain NOVATEK’s operational tests (disinfectant activity, surface-treatment quality, disposal. In the reporting year, there were no cases of to educate workers about the specifics of the novel momentum amid the COVID-19 pandemic in 2020. tests of medical instruments and medical equipment). infectious diseases among employees related to catering coronavirus infection; services or water supply. If medical activities are outsourced to a contractor, the • most of the employees not involved in continuous- contractor has to monitor the compliance with these In 2020, scheduled employee health activities were also operation HPFs were shifted to remote work (from Fire Safety, Civil Defense requirements independently. continued, with preventive medical examinations carried March to August 2020); and Emergencies out to determine employees’ professional fitness to To safeguard employees’ right to safe working conditions, work and case monitoring. During the reporting year, • special protocols were put in place to prevent the spread the Company carries out special assessments of working 11,016 employees underwent medical examinations and of COVID-19 following the return from remote working: Since the Company’s business directly involves operation conditions. In 2020, 9,254 workplaces were certified, 4,095 persons took psychiatric examination. temperature screening at workplaces, social distancing, of facilities exposed to fire and explosion risks, fire safety with no workplaces with hazardous working conditions use of personal protective equipment and sanitizer, strict is a top priority for NOVATEK. The Company has in place identified. However, workplace hazards still exist at our The Company provides its workforce with access to flu restrictions on in-person gatherings, to name a few; a fire safety system compliant with the Russian law. The production facilities, including exposure to the following vaccination: in the reporting year, 15,376 people were system’s objective is to prevent fires and protect people factors with marginal health impact: microclimate, static vaccinated, including 2,612 NOVATEK’s employees and • restrictions were imposed on employee business trips; and property in case of a fire or an emergency. electricity, electromagnetic radiation, noise at workplace, 12,764 contractor and subcontractor employees. chemicals, physical exertion and eye strain. • procedure for shifting employees to remote working The Company’s approach to fire safety, civil defense and was established, along with the introduction of mostly emergency situations and respective activities are fully Occupational health during the COVID-19 digital interaction protocols and IT measures to support aligned with applicable laws and technical regulations. pandemic remote working; For innovative and complex projects, compliance with Occupational Health safety requirements under the design documentation and 403‑6 • COVID-19 testing of employees was arranged; specifications is ensured individually for each facility. 403‑6 In February 2020, an “Action Plan to Safeguard against The Company is strongly focused on the promotion of the Coronavirus at NOVATEK and its Controlled Entities” • data on the COVID-19 situation at facilities was In 2020, eight subsidiaries had licenses to service worker health and provision of timely medical care. First- was put in place to protect employees and prevent collected and analyzed; firefighting equipment, five subsidiaries – to perform aid posts have been set up at the Company’s remote transmission and spread of the novel coronavirus at the firefighting as well as emergency response and rescue facilities. In 2020, the Group operated 28 first-aid posts Company’s facilities. • the Group employees were provided with the necessary operations. A large share of licensed fire safety services with 24-hour availability. To ensure timely provision of personal protective equipment as well as means and is outsourced. Subsidiaries operating hazardous facilities medical care, 51 first-aid posts have been set up at For prompt response and coordination, the Company devices for room disinfection, hand sanitizing, and non- that produce, collect, process, and manufacture contractors’ facilities. In the reporting year, the number established emergency operations centers (Novy Urengoy, contact thermometers to measure body temperature; explosives and flammable substances are protected by of medical staff providing medical services to employees Tarko-Sale, the Leningrad Region and Murmansk, and the 27 professional emergency response and rescue teams. working on a rotational basis rose from 58 to 122. Including Yamal-Nenets Autonomous Region LNG Projects) and • additional contracts were signed with medical service To ensure safety, the Company has over 1,000 permanent the contractors’ first-aid posts, the medical personnel arranged cooperation with the emergency operations providers to put in place prevention and epidemic- employees in professional emergency response and rescue totaled 192. centers of the executive authorities of the Russian control measures; teams and over 200 units of basic and special emergency regions and local authorities. response and rescue equipment for various purposes. To provide medical assistance to employees, the first- • a stock of medicines was built up at facilities to treat In addition, we have decided to build fire stations and aid posts are supplied with advanced equipment. Some The COVID-19 control measures were implemented in strict employees against acute respiratory diseases, including establish emergency response and rescue teams within remote first-aid posts are provided with ambulances (a compliance with the Russian Government Resolution No. COVID-19; prospective field development and construction projects. total of 12 ambulances including contractors’ vehicles). 601 “On Approval of Temporary Regulations for Rotation- The first-aid posts at the most remote sites are equipped Based Work”, dated 28 April 2020, directives by Russia’s • observation and isolation facilities were deployed In 2020, the total headcount of fire and emergency with in-patient facilities and intensive-care units. Chief Public Health Officer, as well as resolutions by the and equipped, medical equipment (a CT scanner, teams serving the facilities on a 24-hour basis stood Operators of remote fields use air ambulances to provide heads of the Russian Federation constituent entities. electrocardiographs, body fluid analyzers, tonometers, at 835 certified rescue workers. 38 engineers directly emergency assistance and airlift injured personnel. pulse oximeters, glucose meters, thermometers) was monitored and supervised the fire safety and emergency Professionally organized efforts within NOVATEK as well as purchased; response environment at the Company’s facilities. In the event of an accident or acute illness (such as an effective cooperation with authorities, medical companies, Materials and equipment available to the emergency infectious disease or intoxication) reported at a facility, and suppliers of medical goods made it possible to measures are taken to minimize the severity of the respond promptly to disruptions caused by the pandemic. 1. This option remained available in 2021.
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response and rescue teams comply with all existing All work-related incidents (injuries or deterioration of health) officers, trade union representatives, injured persons’ NOVATEK is engaged in exploration, production, requirements. The Company ensures timely renewal of are timely recorded in line with the Company’s internal attorneys, and other subsidiary employees investigated transportation, processing, and sales of natural gas and both basic and specialized fire vehicle fleets. procedures. Occupational health laws and guidelines every accident. The commissions identified both the liquid hydrocarbons, which requires technical personnel applicable at NOVATEK subsidiaries and joint ventures immediate and underlying causes of the incidents and to comply with OHS rules when working with complex Inspections are regularly carried out at subsidiary facilities provide that every employee must report all situations that developed respective preventive measures to prevent similar technological processes at flammable and explosive to assess the emergency preparedness and response threaten lives and health, including those that may result in incidents from happening in the future. The employees at facilities. Works and services at these hazardous capabilities of the Company’s business units and personnel, deterioration of health, to their supervisor or employer. fault were held liable and accountable for their actions. production facilities (HPFs) are rendered in line with OHS and evaluate the resources of in-house and external laws. As of 31 December 2020, 260 HPFs were registered professional emergency response and rescue teams. In Properly and timely investigating each incident in OHS units of the Company’s subsidiaries track with territorial bodies of the Russian Federal Environmental, 2020, there were 24,243 patrols of facility areas in order production, the Company can identify the causes of contractors’ workplace injury statistics. Industrial and Nuclear Supervision Service, including: to continuously monitor safe operation conditions, and injuries and take corrective measures to prevent similar 733 checks of outdoor fire water supply sources were incidents from happening in the future, as well as NOVATEK has in place procedures to collect information • Class 1 (extremely hazardous) – 13 facilities; carried out. Professional emergency response and rescue decide on the liability of responsible employees and on on work-related injuries. All information on injuries, teams performed 18,053 control patrols for safe hot compensation for damages. including those which occurred to contractor employees, • Class 2 (highly hazardous) – 51 facilities; work, fire- and gas-hazardous operations. The subsidiary is analyzed in detail. A summary overview of the injuries facilities implement a full-scale program to respond to oil, Accidents in production are investigated and registered is distributed to all subsidiaries and contractors to take • Class 3 (moderately hazardous) – 174 facilities; and petroleum product, and other hydrocarbon spills. in line with Articles 227–231 of the Russian Labor Code and preventive measures. The results of actions taken are Provision No. 73 “On the Peculiarities of the Investigation reported to NOVATEK and are also reviewed and later used • Class 4 (low-hazardous) – 22 facilities. OG13 of Occupational Accidents in Certain Industries and in the annual review of injury rates. Accident records are Fire safety, civil defense and emergency response Organizations”, dated 24 October 2002 and approved submitted to the government statistical services annually. To mitigate the risk of potential accidents and incidents training, as well as fire and emergency drills, are an by Decree of the Russian Ministry of Labor and Social at HPFs, such OHS preventive measures are taken as: important element of the overall system of fire safety and Protection. Hazard identification and risk assessment preparedness to respond to fires and emergencies. In 2020, include analysis of information about incidents submitted in • preventive inspections of equipment; the Company held 25,973 fire safety briefings that featured line with the Company’s standard ISU-0-08 Integrated HSE Accidents and Incidents guidance materials and visual aids, as well as hands-on Management System Standard “Procedure for Reporting of • technical inspections, diagnostics of equipment, presentations. Basic fire safety training was provided to Information About Incidents by Controlled Entities”. NOVATEK records and analyzes not only accidents in buildings and facilities; 8,735 people, with 2,416 tactical fire exercises performed production, but also all incidents and accidents at its as part of emergency spill response plans, accident In line with Federal Law No. 426-FZ “On Special Assessment subsidiaries and joint ventures. The Company consolidates • industrial safety reviews; containment and response plans, as well as evacuation drills. of Working Conditions”, dated 28 December 2013, each information about all incidents submitted in line with the The emergency response and rescue teams are made up of workplace accident resulting in exposure is followed by an Integrated HSE Management System Standard “Procedure • development of regulations (emergency containment 490 certified rescue workers. The number of certified rescue unscheduled special assessment of working conditions for Reporting of Information About Incidents by Controlled and management plans, spill response plans, industrial workers decreased year-on-year by 130 due to changes in within six months, and the Company must inform the Entities”. Such system enables timely response to safety rules, technical regulations, to name a few); legislation and non-professional emergency response team organization that conducts the special assessment incidents and prevention of similar events at other members being excluded from the total number. of working conditions of employees’ proposals on business units through informing and corrective action. • obligatory civil liability insurance of organizations identification of potentially harmful and/or hazardous Information is communicated to the Company employees operating HPFs for damage to life, health or property of In 2020, the Group registered one fire at a non-production production factors in their workplaces (if there are any). in quarterly reviews, letters and memos. third parties and the environment; facility. The combustion area was 15 square meters, no one was injured. In addition to statutory requirements, the Company applies The Company applies a consistent approach to ensure • training and certification of personnel engaged in the its Incident Root Cause Analysis Standard for internal safe and accident-free operations. We assess the risks operation, maintenance, closure, mothballing of HPFs; NOVATEK fully complies with fire safety, civil defense, and investigation of incidents. The main purpose of an internal to the health and safety of employees and accident risks emergency response regulations: all facilities are equipped investigation is to enable a comprehensive review of the during the design phase of projects. • development of guidelines, use of education with automatic fire detection, alarm and extinguishing events preceding an incident and the implementation of automation systems (OLIMP:Oks; Techexpert); and systems. corrective actions to prevent future incidents. To minimize accidents and incidents, each year the Company implements prevention measures, including • signing agreements for servicing HPFs by emergency 403‑9 technical inspection, certification, test and diagnostics response and rescue teams and process safety teams. 14% 12% In 2020, the Group recorded 13 work-related injuries – 11 minor schedules for various types of technical equipment and 19% The Bank of New York Equity Work-Related Injuries injuries and 2 high-consequence injury. 8 out of 13 injuries structures (external and internal inspection, hydrostatic As part of its existing risk management system, the Mellon** Debt were related to employee movement and climate conditions and pneumatic tests, industrial safety reviews). Company also identifies and assesses risks, including 7% OOO Ena Invest 403‑2 403‑3 403‑8 403‑9 (slipping and falling), and the rest to driving vehicles and TOTAL E&P HOLDINGS NOVATEK makes every effort to reduce injuries and prevent performing operations. In 2020, the LTIFR1 among the Group’s RUSSIA 10% accidents; all incidents are thoroughly investigated afterwards. employees registered at 0.49, representing a 29% decline 403-9 19% SWGI Growth Fund compared to 2019 (0.69). There were no fatalities within Severity rate* across the Group in 2018–2020 Number and frequency rate* of injuries across the Group (Cyprus) Limited NOVATEK identifies hazards and assesses injury risks the Company in 2020. The Company also keeps records of in 2018–2020 OOO Gazprom Capital 15 56 14% to meet the requirements of ISO 45001 and applicable injuries among contractors. In 2020, 177 accidents involving 13 Frequency OOO Levit 88% 50 17% Russian laws. We promote risk awareness among our contractor employees were recorded, including 4 fatalities 1.06 rate of injuries Other (less than 5% 10 employees and design risk management initiatives, accidents, with a total of 7 fatalities. each) including for risk prevention and mitigation. 403‑2 28 In line with the Russian Labor Code, our employees have All accidents were investigated in accordance with 0.79 0.81 Creating Sustainable Value the right to abstain from performing their duties if their the applicable laws and local regulations. A dedicated performance involves risks of injury or deterioration of health. commission comprised of the Company’s health and safety 2018 2019 2020 2018 2019 2020 Our corporate purpose is to create sustainable value for all our stakeholders across the entire value chain.
1. Lost Time Injury Frequency Rate is calculated as number of lost time injuries × 1 mln person-hours/total hours worked. * Lost days divided by the number of injuries. * Number of injuries divided by the average headcount. For NOVATEK, creating sustainable shareholder value means: 140 141 SUSTAINABILITY MANAGEMENT: AFFORDABLE, SOCIAL VALUE SAFE AND CLEAN Board of Directors Remuneration and ENERGY Nomination Committee Occupational health defines sustainable and safety for Secure supplier development strategy; prepares personnel and of clean fuel performs risk recommendations to contractors assessment; support the Board’s Mitigating negative Creating decent jobs monitors progress decision-making on environmental sustainability Tax payments impact Educational Implementation of Sustainability Working programs energy-efficient Group involving all Sustainable Development technologies functional departments Division Supporting local communities in the Biodiversity determines focus areas coordinates regions of operation 3 27 79.6 conservation 2,376 1,919 Class 1 – extremely for sustainability efforts sustainability actions to Charity hazardous — 0.01% Occupational and coordinates ensure transparency and Class 2 – highly departments’ relevant creation of long-term 49.6 safety Compliance with 47.2 hazardous — 0.06% efforts sustainable value for human rights Class 3 – moderately stakeholders hazardous — 4.05% Class 4 – low hazardous — 90.84% Class 5 – virtually 42,889 non-hazardous — 5.03% 2018 2019 2020 LONG-TERM SHAREHOLDER VALUE
Return on capital Responsible business Driving innovation Responsible business
Climate change High economic Effective and transparent Information management value added corporate governance security
The growing market capitalization and total shareholder returns are driven by the Company’s sustainability efforts as well as its financial and operational performance.
Good Health Quality Affordable Decent Work Climate Action and Well-being Education and Clean Energy and Economic Growth
NOVATEK’s Sustainable Development Strategy is aligned with the UN Sustainable Development Goals, with five SDGs prioritized by the Company. THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
man-made risks, such as risks of disasters, and develops • prevent and contain accidents related to emission Drills run in 2020 demonstrated that facilities have OG13 measures to mitigate their impacts. To assess man-made (discharge) of hazardous substances; sufficient capabilities to respond to potential accidents The Company puts emphasis on training its workers, risks at HPFs or ship transport facilities, the maximum and emergencies and confirmed that our professional who face various work-related hazards: using of power possible losses are estimated by modelling the impact of • ensure the safety of operational staff; emergency response and rescue teams are fully prepared tools and complex equipment, working at heights and such risks on the Company’s or third parties’ operations to perform their tasks. in confined spaces. Personnel must have the necessary when preparing surveyor’s reports for risk insurance • install automatic controls, safety trips, alarm and knowledge and skills to enhance safety at workplace. purposes or during risk assessment. The Company safety shutdown systems; In 2020, the Group recorded no accidents and two To this end, the Company has in place a differentiated prepares business continuity plans for major scenarios incidents that did not affect safety of people or OHS training system for each job, including briefings and of emergencies and incidents. The plans define the most • ensure accident-proof operation of production control operating processes. apprenticeships. Blue-collar workers undergo regular effective measures to restart production as soon as units and systems, safety of their personnel, and mandatory briefings, including induction, initial, refresher, possible and a procedure for the Group business units process controllability during accidents; unscheduled, and ad-hoc briefings. Briefings are held in and employees to interact between each other and with OHS Training line with approved programs, including skill and knowledge external stakeholders with the view to maintaining critical • set up back-up power supply, ventilation, water supply tests. Ad-hoc briefings are provided to employees operations at an acceptable level and reducing possible sources, communications systems, and materials for All NOVATEK subsidiaries and joint ventures provide regular assigned an ad-hoc job outside their respective scopes costs in case of risk realization. The first plans were on-site accident response; training in OHS and first aid, and are certified to industrial of duties. Additionally, blue-collar workers are trained in approved in 2019. In 2020, the development of business safety standards. providing first aid that may be needed in emergencies and continuity plans continued. • ensure safety and security at hazardous production accidents. All amendments to OHS regulations and the facilities against unauthorized interventions, construct 403‑4 403‑5 results of accident investigations are communicated to All subsidiary and joint venture HPFs have in place and install checkpoints to ensure rapid emergency The Company regularly delivers training to ensure that employees at unscheduled briefings and team meetings. accident containment and response plans and emergency evacuation of personnel with different wind directions, employees are sufficiently competent in these areas. The Briefings are held by the occupational health and safety spill response plans, as well as running regular emergency as well as accident alert systems; and training programs: unit and direct supervisors. drills. The plans cover various emergency scenarios for an HPF and accident containment and response measures. • ensure free access and movement of rescue crews and • cover all the Company employees as per appropriate OHS training and testing take place on the job. In 2020, Additionally, all production facilities undergo annual teams across the site. procedures; 30 subsidiaries and joint ventures used the OLIMP:Oks preventive maintenance, as well as conduct diagnostics licensed automated training and knowledge testing to prevent accidents related to loss of containment and Six entities of the Company have their own certified • are carried out by competent persons; system for testing and certifying employees. Automated hydrocarbon spillage and leakage. professional emergency response and rescue teams, programs allow to minimize the risks of cheating and while other entities have signed agreements with licensed • provide for effective and timely initial and refresher falsifying testing results. Design documents1 provide for measures to prevent and contractors. training at set frequency; contain accidents (including injuries to employees) that occur OHS certification is mandatory for managers, specialists on-site or as a result of accidents at adjacent facilities. 403‑5 • include feedback from trainees on how clear the course and personnel operating hazardous production facilities We conduct theory and practice courses for members materials were and how well they have learned it; and (HPF) and is a key to HPF’s correct and safe operation. The initiatives cover hazard sources, risk factors, accident of these teams to enhance the teams’ emergency OHS certification process in line with applicable laws is causes and scenarios, and the number and location of preparedness and response and rescue capabilities. • are regularly reviewed and updated to reflect changes monitored by the Federal Environmental, Industrial and operational staff. Training is provided through specially designed programs, in laws and employees’ scope of work. Nuclear Supervision Service of Russia and is carried out while professional development and certification are through the Unified Testing Portal information system. Accident prevention and containment initiatives include provided at educational institutions. Business unit leaders, including the Company top organizational and engineering solutions to: managers, take courses in training centers, while experts Professional emergency response and rescue teams are offered in-house training opportunities. For that, • prevent leakages and emissions of hazardous enhance their hands-on skills through relevant drills and training programs were developed, and OHS knowledge substances in amounts harmful for operational staff training. Drill and training topics are selected based on testing commissions were set up. and the environment; a comprehensive assessment of existing risks inherent to the operations of our facilities exposed to fire and • install monitoring systems and identify explosive explosion hazards and their geographic location (the concentrations of hazardous substances; Far North).
403‑5 Details on the 2020 incidents across the Group Number of employees who completed OHS training in 2018–2020
Date of Facility Description Consequences Type of training 2018 2019 2020 inci-dent OHS training 8,153 10,256 11,518 15 January NOVATEK-AZK A driver (consumer), while refueling, got into the vehicle and, without making The closure First aid training 7,757 10,134 10,394 2020 sure that the dispenser was disconnected, started driving. As a result, the did not affect dispenser’s breakaway coupling was activated. The pump was temporarily closed the sales. OHS training and certification 2,966 2,544 2,479 for replacement of the breakaway coupling. TOTAL 18,876 22,934 24,391 10 June NOVATEK- A power outage on a service entrance section caused a partial shutdown (until The shutdown 2020 Purovsky ZPK the recloser began closing the circuit) of process and auxiliary equipment. The did not affect power outage occurred as a result of adverse weather conditions (thunderstorm operations. with sharp gusts of wind).
1. The list of design documents is prepared under Resolution of the Russian Government No. 87 dated 16 February 2008 “On the List of Design Documentation Sections and Requirements to Their Content”.
142 143 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
APPENDIX 1. About the Report This Report has been prepared in accordance with the Defining Report content and material topics information is presented for three years to ensure GRI Standards: Core option. comparability. 102‑32 102‑54 102‑56 102‑43 102‑44 102‑49 This Sustainability Report 2020 is NOVATEK’s 14th report. 102‑46 The Company identified material topics in late 2020–early Three material topics were fully disclosed for the first The most widely recognized non-financial reporting Principles for defining report quality (based on 2021 as part of its Sustainability Report 2020 preparation time in this Report: standards – GRI, SASB and TCFD – were used in preparing GRI recommendations): process. The procedure was carried out in several stages: the Report. Additionally, the Company focused on metrics 1) Innovation; and requirements of ESG rating and sustainability rating • The Company’s working group analyzed all material agencies such as S&P Global Corporate Sustainability Accuracy Comparability topics relevant to the oil and gas industry and compiled 2) Information Security; and Assessment, FTSE Russell, Sustainalytics, MSCI, as comprehensive a list as possible. Institutional Shareholder Services (ISS), Engagement 3) Impact of the COVID-19 Pandemic on the Company’s International (EI), to name a few. • Based on the list of relevant topics, a questionnaire was Business, and the Company’s Response to the prepared for the heads of the Company’s departments Pandemic. The information included in the Report is confirmed by Balance Reliability and for stakeholders. The respondents were asked to functional managers, the final document is approved rate each topic on the following scale: no materiality – The Procurement topic was deemed insignificant based by the Company’s Board of Directors and is preliminarily low materiality – medium materiality – high materiality – on the rating by the survey respondents; however, the considered by the Remuneration and Nomination very high materiality. Company continued to disclose information on this topic Committee in charge, inter alia, of sustainable as the Report preparation working group deemed it development matters. This Report has also been Clarity Timeliness • Based on the survey results, a materiality matrix was important. externally assured by an independent auditor1. generated, where the vertical axis shows the materiality of topics to stakeholders (based on stakeholder Principles of defining the Report content (based on GRI questionnaires) and the horizontal axis shows the recommendations): 102‑45 102‑46 102‑50 102‑51 102‑52 102‑54 102‑56 Company’s impact within the topics (based on NOVATEK's NOVATEK's questionnaires for the heads of departments). Material • stakeholder inclusiveness; Report title priority SDGs PAO NOVATEK’s Sustainability Report relevant SDGs topics are located above the cut-off line (diagonally). • sustainability context; Reporting cycle Good Health Annual Responsible Consumption No Poverty • As a result, 23 material topics were identified. and Well-being and Production Reporting period 1 January–31 December 2020 • materiality; and In preparing the Report’s content, all material topics were Date of the ReportQuality 2020 Q3 2021 Clean Water Life Below disclosed as fully as possible in terms of the description • completeness. Education and Sanitation Water Date of most recent Report Q3 2020 of approaches as well as 2020 performance. Quantitative
The expected date of the next Report Q3 2022 Affordable Industry, Innovation Life Reporting Standards Key standards appliedand Clean Energy GRI Standards: Core optionand Infrastructure on land
GRI G4 Oil & Gas Sector disclosures (GRI G4 — OG) Decent Work Reduced Partnerships Oil & Gas Exploration & Production Sustainability Accounting Standard of the and Economic Growth Inequalities for the Goals Sustainability Accounting Standards Board (SASB)
Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) Climate Sustainable Cities NOVATEK's Sustainability Report is prepared in accordance with GRI Sustainability Reporting Standards, Additional standardsAction and requirements Oil and Gas Industry Guidanceand Communities on Voluntary Sustainability Reporting, IPIECA/API/IOGP, the Oil & Gas – Exploration & Production industry Sustainability Accounting Standard published by the used 2015 Sustainability Accounting Standards Board (SASB), as well as aligned with the recommendations of the AA1000SES Stakeholder Engagement Standard Task Force on Climate-Related Financial Disclosures (TCFD).
National GOST R ISO 26000:2012 Standard Increasing positive impact The highest corporate governance body NOVATEK’s Board of Directors SASB Oil & Gas Exploration and Production TCFD Core Elements that ap-proves the Report Disclosure Topics Number of material topics 23 • Governance Construction Exploration Liquefaction Marketing and final Transportation Transshipment • GHG Emissions • Strategy and Production and Processing consumption Number of published reports 14 • Air Quality • Risk Management Report boundaries The Report covers key business units, subsidiaries and joint ventures of РАО NOVATEK • Water Management • Metrics and Targets in Russia, Poland, Germany, Switzerland, Singapore, Montenegro, Lebanon, and • Biodiversity Impacts • Human Rights and Communities Relations Cyprus2 • Employee and Contractor Health and Safety Company names used in this Report Information contained in the Report comprises information on NOVATEK, its • Business Model Resilience consolidated subsidiaries and joint ventures (hereinafter jointly referred to as • Business Ethics “NOVATEK”, the “Company”, “NOVATEK Group” or the “Group”) • Risk Management
Auditor AO “PricewaterhouseCoopers Audit”
Minimizing negative impact
1. The independent limited assurance report is available on p. 177. 2. Details on Report boundaries are available in Appendix 4, p. 155.
144 145 1.0 3.0 4.0 Materiality 2.0 to stakeholders 0 The Company’s impact 1.0 25 24 2.0 5 28 27 3 22 15 23 21 30 20 26 9 29 3.0 4 10 2 6 8 14 16 13 11, 12 7 19 17 18 1 4.0 Materiality matrix 146 THINK GREEN.NATURAL GAS. 1.0 3.0 4.0 Materiality 2.0 to stakeholders 0 The Company’simpact 1.0 25 24 2.0 5 28 27 3 22 15 23 21 30 20 26 9 3.0 29 4 10 6 2 8 14 16 13 11, 12 7 19 17 18 1 4.0 10 List oftopics Sustainability Report 2020 Occupational HealthandSafety Interaction Between Employees andManagement Employment andSocialBenefits for Employees, EnvironmentalSupplier Assessment Environmental Compliance Effluents andWaste Climate Change Air Emissions Biodiversity Water Resources Energy ConsumptionandEfficiency The Company’s Innovation Activities Business Model Pandemic Business, andtheCompany’s Response to the Impact oftheCOVID-19 Pandemic ontheCompany’s External SocialPolicy Information Security Socioeconomic Compliance Customer HealthandSafety Financial Participation inPolitical Life AssessmentSupplier for SocialImpacts Local Communities, IndigenousMinorities Human Rights Ensuring Employee Rights andEqualOpportunities Personnel Training andDevelopment Accidents andIncidents Emergency Preparedness Taxes Anti-Corruption Procurement Local Development Economic Performance Topic 2‑47 Other source Report section/ 30 20 24 25 22 29 26 23 28 27 10 14 15 13 12 16 21 19 18 17 11 4 5 9 6 3 2 8 7 1 Environmental Performance andProtection, p. 102 Climate Change, p. 76 Environmental Performance andProtection, p. 104 – Environmental Performance andProtection, p. 99 Environmental Performance andProtection, p. 107 Employment Practices, p. 128 Environmental Performance andProtection, p. 92 Environmental Performance andProtection, p. 97 About theCompany, p. 22 About theCompany, p. 14 – Employee Health,OccupationalHealthandSafety, p. 141 Employee Health,OccupationalHealthandSafety, p. 139 Employee Health,OccupationalHealthandSafety, p. 138 p. 138 Employee Health,OccupationalHealthandSafety, Sustainable Development Strategy, p. 36 Social Investments, p. 120 – – – Business Ethics, p. 52 Stakeholder Engagement, p. 41 Social Investments, p. 120 Business Ethics, p. 54 Employment Practices, p. 128 Employment Practices, p. 130 Business Ethics, p. 52 Procurement, p. 114 Social Investments, p. 120 Annual Report, p. 14 About theCompany, p. 12 No. inthematrix Business Ethics, p. 55 – Business Ethics, p. 54 147 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
APPENDIX 2. Personnel Structure Region Female Male Total
405‑1 Krasnodar Territory 0 7 7 Personnel structure by gender and age as of 31 December 2020 Tver Region 0 6 6
Tula Region 0 6 6 Age of employees, years Female % Male % Total % Kamchatka Territory 3 1 4 Under 30 487 12 1,338 10 1,825 11 Arkhangelsk Region 0 3 3 30 to 50 2,957 76 9,567 74 12,524 74 Republic of Tatarstan 0 1 1 50+ 457 12 2,015 16 2,472 15 Novosibirsk Region 0 1 1 TOTAL 3,901 12,920 16,821 Republic of Mari El 0 1 1
Personnel structure by line of work and gender as of 31 December 2020 Poland 37 83 120 Singapore 27 31 58 Line of work Total head-count, % of total Female Male Female, % Male, % Switzerland 21 25 46 people headcount Cyprus 3 0 3 Exploration and 5,652 34 1,054 4,598 27 36 production Lebanon 2 1 3
Transportation 736 4 129 607 3 5 Montenegro 2 1 3
Marketing 2,252 13 1,118 1,134 29 9 TOTAL 3,901 12,920 16,821
Processing 1,367 8 244 1,123 6 9 102‑8 Administrative 1,062 6 432 630 11 5 Personnel structure by type of employment contract and gender as of 31 December 2020 personnel
Power supply 1,178 7 76 1,102 2 9 Fixed-term Permanent
Auxiliary production 409 3 118 291 3 2 Female 525 3,376
Male 1,144 11,776 LNG production 4,165 25 730 3,435 19 27 TOTAL 1,669 15,152 TOTAL 16,821 3,901 12,920
102‑8 102‑8 Personnel structure by gender and region as of 31 December 2020 Personnel structure by type of employment contract and region as of 31 December 2020
Region Female Male Total Region Fixed-term Permanent
Yamal-Nenets Autonomous Region 1,251 8,876 10,127 Yamal-Nenets Autonomous Region 665 9,462
Moscow and Moscow Region 976 1,410 2,386 Moscow and Moscow Region 457 1,929
Chelyabinsk Region 711 577 1,288 Chelyabinsk Region 56 1,232 St. Petersburg and Leningrad Region 84 894 St. Petersburg and Leningrad Region 230 748 978 Tyumen Region 36 510 Tyumen Region 192 354 546 Murmansk Region 272 202 Murmansk Region 124 350 474 Rostov Region 8 206 Rostov Region 79 135 214 Kostroma Region 25 177 Kostroma Region 115 87 202 Volgograd Region 6 195 Volgograd Region 86 115 201 Khanty-Mansiysk Autonomous Region 1 62 Khanty-Mansiysk Autonomous Region 10 53 63 Perm Territory 3 19 Perm Territory 13 9 22 Republic of Bashkortostan 0 20
Republic of Bashkortostan 8 12 20 Astrakhan Region 0 20
Astrakhan Region 8 12 20 Sverdlovsk Region 0 10
Sverdlovsk Region 0 10 10 Samara Region 0 8
Samara Region 3 5 8 Krasnodar Territory 3 4
148 149 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Region Fixed-term Permanent Region Female Male Total
Tver Region 0 6 Volgograd Region 19 43 62
Tula Region 0 6 Khanty-Mansiysk Autonomous Region 0 2 2
Kamchatka Territory 1 3 Perm Territory 1 0 1
Arkhangelsk Region 1 2 Republic of Bashkortostan 6 10 16
Republic of Tatarstan 0 1 Astrakhan Region 1 1 2
Novosibirsk Region 0 1 Sverdlovsk Region 0 10 10
Republic of Mari El 0 1 Samara Region 2 1 3 Poland 23 97 Krasnodar Territory 0 1 1 Singapore 18 40 Tver Region 0 6 6 Switzerland 4 42 Tula Region 0 6 6 Cyprus 3 0 Kamchatka Territory 1 0 1 Lebanon 3 0 Arkhangelsk Region 0 0 0 Montenegro 0 3 Republic of Tatarstan 0 0 0 TOTAL 1,669 15,152 Novosibirsk Region 0 0 0
Republic of Mari El 0 1 1 102‑8 Personnel by type of employment and gender as of 31 December 2020 Poland 5 10 15
Singapore 11 8 19 Part-time Full-time Switzerland 1 3 4 Female 38 3,863 Cyprus 0 0 0 Male 14 12,906 Lebanon 0 0 0 TOTAL 52 16,769 Montenegro 1 0 1
TOTAL 588 1,800 2,388 401‑1 Personnel hired in 2020 by gender and age 401‑1 Age of employees, years Female Male Total Employee turnover in 2020 by gender and region
Under 30 130 352 482 Gender/region Average headcount, Resignations, Employee turnover rate, 30 to 50 430 1,288 1,718 people people %1
50+ 28 160 188 Female 3,474 309 9
TOTAL 588 1,800 2,388 Male 12,440 610 5
TOTAL 15,914 919 6
401‑1 Yamal-Nenets Autonomous Region 9,826 320 3 Personnel hired in 2020 by gender and region Moscow and Moscow Region 2,186 153 7
Region Female Male Total Chelyabinsk Region 1,211 209 17
Yamal-Nenets Autonomous Region 101 899 1,000 St. Petersburg and Leningrad Region 930 54 6
Moscow and Moscow Region 154 296 450 Tyumen Region 491 11 2
Chelyabinsk Region 122 140 262 Rostov Region 205 42 20
St. Petersburg and Leningrad Region 38 84 122 Kostroma Region 187 3 2
Tyumen Region 59 79 138 Volgograd Region 192 69 36 Murmansk Region 323 31 10 Murmansk Region 39 174 213
Rostov Region 20 22 42
Kostroma Region 7 4 11 1. The employee turnover rate is calculated as resignations divided by average headcount in 2020. Percentage is calculated as the resulting value multiplied by 100.
150 151 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
1 Gender/region Average headcount, Resignations, Employee turnover rate, APPENDIX 3. Key Environmental Performance Indicators people people %1 Indicator Unit of measurement 2018 2019 2020 Khanty-Mansiysk Autonomous Region 65 4 6 AIR POLLUTANT EMISSIONS Perm Territory 21 0 0 Scope 1 GHG emissions, including mmt of CO equivalent 6.06 11.11 9.06 Astrakhan Region 20 1 5 2 • by production facilities mmt of CO equivalent 4.742 7.49 5.52 Krasnodar Territory 7 0 0 2 • by processing facilities mmt of CO equivalent 0.672 0.59 0.59 Samara Region 6 0 0 2 • by LNG production facilities mmt of CO equivalent 2.322 2.91 2.81 Arkhangelsk Region 3 0 0 2 • by energy service facilities mmt of CO equivalent – 0.12 0.14 Kamchatka Territory 4 0 0 2
3 Republic of Bashkortostan 15 5 33 Scope 1 GHG emissions, including
Novosibirsk Region 1 0 0 • from stationary combustion, including flaring mt of CO2 equivalent – – 8,853.0
Republic of Tatarstan 1 0 0 • fugitive emissions mt of CO2 equivalent – – 166.8
Sverdlovsk Region 3 1 32 Scope 2 GHG emissions mt of CO2 equivalent 187.8 204.8 228.5
Tver Region 5 4 80 Scope 3 GHG emissions mt of CO2 equivalent – – 173,251
Tula Region 4 0 0 Specific GHG emissions
Poland 110 0 0 • by production facilities tons of CO2 equivalent 8.76 12.58 8.65 per mboe Switzerland 42 3 7 • by processing facilities tons of CO equivalent 0.037 0.034 0.031 Singapore 48 8 17 2 per ton of processed Montenegro 3 1 33 hydrocarbons
Cyprus 3 0 0 • by LNG facilities tons of CO2 equivalent 0.27 0.26 0.24 per ton of LNG Lebanon 3 0 0 APG utilization rate % 97.1 83.3 96.2 TOTAL 15,914 919 6 Air pollutant emissions, including tons 70,302.0 75,603.1 87,272.6
401‑3 • particulate matter tons 3,873.5 2,696.6 5,590.3 Number of employees that took parental leave or returned to work after parental leave ended in 2020 • carbon monoxide tons 37,386.9 40,059.2 48,114.3
Number of employees that took parental leave during 2020, Number of employees that returned to work in 2020 after • nitrogen oxide (NO2 equivalent) tons 8,466.7 13,295.9 11,082.6 people parental leave ended, people • sulfur dioxide tons 28.2 62.0 77.4 Female 140 98 • hydrocarbons (including methane) tons 7,677.3 6,166.3 8,909.9 Male 8 2 • VOCs tons 12,851.6 13,258.2 13,417.8 TOTAL 148 100 • other tons 17.8 64.9 80.3
Specific air emissions tons per mboe 0.128 0.128 0.143 405‑1 Air emissions in cities tons – 15 19 Management breakdown by gender and age as of 31 December 2020 Methane emissions, including tons 7,265 6,001 8,475 Age, years Female % Male % Total % • by production facilities tons 102 88 84 Under 30 0 0 0 0 0 0 • by processing facilities tons 7,163 5,913 8,391 30 to 50 28 64 156 79 184 76 Specific methane emissions from production, processing, tons per mmboe 13.60 10.44 14.44 50+ 16 36 41 21 57 24 and LNG production
TOTAL 44 18 197 82 241
1. Environmental performance data is calculated based on the Company’s proportional share in joint ventures, except for energy efficiency data that was based on a 100% share. 2. Based on a 100% share. 3. Scope 1 emissions by source type are disclosed for the first time in our Sustainability report 2020.
152 153 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
1 Indicator Unit of measurement 2018 2019 2020 APPENDIX 4. Report Boundaries
1 The GHG Intensity ratio kg of CO2 equivalent 298 298 295 102‑45 102-46 per boe Report Scope WASTE MANAGEMENT 1 2 3 4 5 6 Volume of waste generated, including mt 49.6 79.8 47.2 PAO NOVATEK + + + • drill mud mt – – 37.4 OOO NOVATEK-Yurkharovneftegas + + + + + +
2 Significant spills events 1 0 0 OOO NOVATEK-Tarkosaleneftegas + + + + + +
WATER USE AND DISPOSAL OOO NOVATEK-Purovsky ZPK + + + + + +
Water consumption (excluding water for RPM3), including mcm 2,537 2,365 2,040 OOO NOVATEK-Transervice + + + + + +
• freshwater mcm – 1,711 1,952 OOO Arctic LNG 1 + + + + OOO Arctic LNG 3 + + + Water withdrawal, including mcm 2,9934 2,365 2,040 OOO NOVATEK-Murmansk + + + + + + • freshwater mcm – 1,711 1,952 AO NOVATEK-Pur + + + + + + Water discharge (excluding water for RPM)5 mcm 2,9284 2,395 1,705 OOO Chernichnoye2* + Specific water consumption ООО NOVATEK Scientific and Technical Center + + + • at production facilities mcm per mboe 5.1 3.7 2.2 ООО NOVATEK-Energo + + + + + • at processing facilities mcm per mt of 0.011 0.011 0.010 OOO NOVATEK-AZK + + + + products OOO NOVATEK-Ust-Luga + + + + + + Volume of produced water mmt 4.2 7.6 7.7 OOO NOVATEK-Perm + + + Injection for reservoir pressure maintenance mmt 3.1 5.7 5.5 ООО NOVATEK-Chelyabinsk + + + + + ENERGY CONSUMPTION AND EFFICIENCY OOO NOVATEK-Kostroma + + +
Total consumption of heat and electricity thousand GJ 10,377 12,943 13,482 OOO NOVATEK Moscow Region + + +
Total renewable energy systems units 124 132 148 OOO Sherwood Premier + + + +
Share of renewables in total electricity generation % 0.02 0.01 0.01 OOO EkropromStroy +
Total electricity generation from renewables thousand kWh 347 263 222 OOO Maritime Arctic Transport +
ENVIRONMENTAL COSTS OOO NOVATEK-Kamchatka + + + OOO Yargeo + + + + + + Environmental costs RR mln 1,494 1,425 2,382 OOO Obskiy LNG3 + + + + + Environmental charges RR mln 6.7 14.1 5.9 OOO NOVATEK – Western Arctic4 + + + + Total amount of fines for environmental breaches RR mln 0.79 0.42 1.66 ООО NORDPORT + +
OOO SMART LNG* +
OOO Arctic Transshipment5 + +
Novatek Gas & Power GmbH + +
Novatek Gas & Power Asia Pte. Ltd. + +
Novatek Asia Development Holding Pte. Ltd. + +
Novatek Green Energy Sp. z o.o.6 + +
1. Report boundaries for GRI and SASB topics and indicators are given in the Appendix 5. Compliance with the GRI Standards and Appendix 6. Compliance with SASB. 2. On 12 March 2021, an entry was made in the Unified State Register of Legal Entities about the dissolution of OOO Chernichnoye 1. The GHG Intensity ratio is calculated by dividing the total GHG combustion emissions from the total hydrocarbon production into the through its merger with ZAO Terneftegas. hydrocarbon production volumes (in boe). 3. On 10 June 2021, OOO Obskiy LNG was renamed OOO Obskiy Gas Chemical Complex. 2. Significant spills are determined based on the requirements of the regulatory legal acts of the Russian Federation and the relevant 4. OOO NOVATEK – Western Arctic merged with OOO Arctic Transshipment on 26 February 2021, with the former renamed OOO Arctic Company’s regulations. Transshipment on 19 March 2021. 3. RPM – reservoir pressure maintenance. 5. On 26 February 2021, an entry was made in the Unified State Register of Legal Entities about the dissolution of OOO Arctic 4. Based on a 100% Company’s share in joint ventures. Transshipment through its merger with OOO NOVATEK – Western Arctic. 5. Discharged wastewater is classified by salinity as freshwater. 6. Novatek Polska prior to 3 February 2020.
154 155 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Report Scope APPENDIX 5. Compliance with the GRI Standards
1 2 3 4 5 6 102‑55 Novatek Equity (Cyprus) Limited + + Indicator Indicator description Section of the Report / Notes Report Scope NOVATEK Montenegro B.V. + + index
NOVATEK Lebanon SAL + + GENERAL DISCLOSURES
Novatek Finance Designated Activity Company + Organizational Profile
OAO Yamal LNG* + + + + + 102-1 Name of the organization About the Company, p. 10 1
ZAO Terneftegas* + + + + + 102-2 Activities, brands, products, and About the Company, p. 10 1 services ZAO Nortgas* + + + + + Annual Report, p. 16-29
AO Arcticgas* + + + + + The Company does not produce goods or provide services prohibited in any market. OOO Cryogas-Vysotsk* + + + + + 102-3 Location of headquarters About the Company, p. 10 1 Rostock LNG GmbH* + 102-4 Location of operations About the Company, p. 10 1 OOO Arctic LNG 2* + + + + + Annual Report, p. 16-29 OOO Sabetta International Airport* + + + 102-5 Ownership and legal form About the Company, p. 10 1 Yamal Trade Pte. Ltd.* + + 102-6 Markets served About the Company, p. 10 1 * For joint ventures economic performance includes only consolidation of share in profits, environmental performance is calculated based on the Company’s proportional share in joint ventures. Annual Report, p. 16-29
102-7 Scale of the organization About the Company, p. 11 1
Employment Practices, p. 128
Annual Report, p. 16-29
102-8 Information on employees and other Employment Practices, p. 129 1 workers Appendix 2. Personnel Structure, p. 148-150
Workers who are not employees do not perform a significant portion of the Company’s activities.
There are no seasonal or other variations in headcount.
102-9 Supply chain Procurement, p. 114 1
102-10 Significant changes to the About the Company, p. 10 1 organization and its supply chain
102-11 Precautionary Principle or approach Environmental Performance and 1 Protection, p. 92
102-12 External initiatives About the Company, p. 21 1
Sustainable Development Strategy, p. 31-36
Environmental Performance and Protection, p. 111
102-13 Membership of associations About the Company, p. 20 1
Strategy
102-14 Statement from senior Letter from the Chairman of the 1 decision-maker Management Board, p. 4-5
102-15 Key impacts, risks, and opportunities Corporate Governance, p. 68-73 1
Annual Report, p. 74-87
156 157 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Indicator Indicator description Section of the Report / Notes Report Scope Indicator Indicator description Section of the Report / Notes Report Scope index index
Ethics and Integrity Stakeholder Engagement
102-16 Values, principles, standards, and Business Ethics, p. 52 1 102-40 List of stakeholder groups Stakeholder Engagement, p. 41 1 norms of behavior 102-41 Collective bargaining agreements Collective bargaining agreements cover 1 102-17 Mechanisms for advice and Business Ethics, p. 53 1 92% of the Company’s employees. concerns about ethics 102-42 Identifying and selecting Stakeholder Engagement, p. 40 1 Governance stakeholders
102-18 Governance structure Corporate Governance, p. 60-61, 64 1 102-43 Approach to stakeholder Stakeholder Engagement, p. 40-41 1 engagement 102-19 Delegating authority Corporate Governance, p. 66 1 Appendix 1. About the Report, p. 145
102-20 Executive-level responsibility for Corporate Governance, p. 66 1 102-44 Key topics and concerns raised Stakeholder Engagement, p. 42-49 1 economic, environmental, and social Appendix 1. About the Report, p. 145 topics Reporting Practice 102-21 Consulting stakeholders on Corporate Governance, p. 61, 66 1 economic, environmental, and social 102-45 Entities included in the consolidated About the Company, p. 11 1 topics financial statements Appendix 1. About the Report, p. 144 102-22 Composition of the highest Corporate Governance, p. 63 1 Appendix 4. Report Boundaries, p. 155-156 governance body and its committees 102-46 Defining report content and topic Appendix 1. About the Report, p. 144 1 102-23 Chair of the highest governance Corporate Governance, p. 62 1 Boundaries body Appendix 4. Report Boundaries, p. 155-156
102-24 Nominating and selecting the Corporate Governance, p. 62 1 102-47 List of material topics Appendix 1. About the Report, p. 146-147 1 highest governance body 102-48 Restatements of information There were no restatements. 1 102-25 Conflicts of interest Business Ethics, p. 54 1 102-49 Changes in reporting Appendix 1. About the Report, p. 145 1 102-26 Role of highest governance body Corporate Governance, p. 61-62 1 102-50 Reporting period Appendix 1. About the Report, p. 144 1 in setting purpose, values, and strategy 102-51 Date of most recent report Appendix 1. About the Report, p. 144 1
102-27 Collective knowledge of highest Corporate Governance, p. 62 1 102-52 Reporting cycle Appendix 1. About the Report, p. 144 1 governance body 102-53 Contact point for questions Alexander Nazarov, Head of IR 1 102-28 Evaluating the highest governance Corporate Governance, p. 63 1 regarding the report +7 495 730 6013 body’s performance [email protected] 102-29 Identifying and managing economic, Corporate Governance, p. 61-62, 64-66, 69 1 environmental, and social impacts 102-54 Claims of reporting in accordance Appendix 1. About the Report, p. 144 1 with the GRI Standards 102-30 Effectiveness of risk management Corporate Governance, p. 69 1 processes 102-55 GRI content index Appendix 5. Compliance with the GRI 1 Standards, p. 157-170 102-31 Review of economic, environmental, Corporate Governance, p. 62-66, 69 1 and social topics 102-56 External assurance Appendix 1. About the Report, p. 144 1
102-32 Highest governance body’s role in Appendix 1. About the Report, p. 144 1 SPECIFIC STANDARD DISCLOSURES sustainability reporting Category: Economic 102-33 Communicating critical concerns Corporate Governance, p. 62 1 201 Economic Performance 102-34 Nature and total number of critical Corporate Governance, p. 62-63 1 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 concerns Manage topic and its Boundary 102-35 Remuneration policies Corporate Governance, p. 67 1 ment 103-2 The management approach Management’s Discussion and Analysis 1 Approach 102-36 Process for determining Corporate Governance, p. 67 1 and its components of Financial Condition and Results remuneration of Operations for the Year Ended 31 The Company does not engage 103-3 Evaluation of the management 1 December 2020, p. 12-21 consultants on remuneration matters, approach which fall within the remit of the 201-1 Direct economic value generated About the Company, p. 13 1 Remuneration and Nomination Committee and distributed made up of independent directors. 201-2 Financial implications and other risks Climate Change, p. 78-81 1 and opportunities due to climate change
158 159 THINK GREEN. THINK NATURAL GAS. Sustainability Report 2020
Indicator Indicator description Section of the Report / Notes Report Scope Indicator Indicator description Section of the Report / Notes Report Scope index index
201-3 Defined benefit plan obligations and The total of employee benefits is included 1 Category: Environmental other retirement plans in other non-current liabilities in the 302 Energy consolidated financial statements and stands at RR 5.7 bln as of 31 December 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 5 2020. Manage topic and its Boundary ment 202 Market Presence 103-2 The management approach Environmental Performance and 5 Approach and its components Protection, p. 92-95, 97-98 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1, excluding foreign subsidiaries Manage topic and its Boundary and joint ventures 103-3 Evaluation of the management 5 ment approach 103-2 The management approach Employment Practices, p. 128 1, excluding foreign subsidiaries Approach and its components and joint ventures 302-1 Energy consumption within the Environmental Performance and 5 organization Protection, p. 98 103-3 Evaluation of the management 1, excluding foreign subsidiaries approach and joint ventures 302-2 Energy consumption outside of the All energy is consumed within the Group. 5 organization 202-1 Ratios of standard entry level Employment Practices, p. 128 1, excluding foreign subsidiaries wage by gender compared to local and joint ventures 302-3 Energy intensity Environmental Performance and 5 minimum wage Protection, p. 98
203 Indirect Economic Impacts 302-4 Reduction of energy consumption Environmental Performance and 5 Protection, p. 97 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 4 Manage topic and its Boundary 302-5 Reductions in energy requirements Reduction of energy demand at 5 ment of products and services production facilities is only possible if 103-2 The management approach Social Investments, p. 120-122 4 Approach energy consumption is reduced as part and its components of energy saving and energy efficiency 103-3 Evaluation of the management 4 initiatives. approach 303 Water and Effluents 203-1 Infrastructure investments and Social Investments, p. 120-122 4 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 3 services supported Manage topic and its Boundary 203-2 Significant indirect economic impacts Social Investments, p. 120-122 4 ment 103-2 The management approach Environmental Performance and 3 Approach 204 Procurement Practices and its components Protection, p. 92-95, 104-106
103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 103-3 Evaluation of the management 3 Manage topic and its Boundary approach ment 103-2 The management approach Procurement, p. 114-115 1 303-1 Interactions with water as a shared Environmental Performance and 3 Approach and its components resource Protection, p. 104-106
103-3 Evaluation of the management 1 303-2 Management of water discharge- Environmental Performance and 3 approach related impacts Protection, p. 105
204-1 Proportion of spending on local Procurement, p. 116 1 303-3 Water withdrawal Environmental Performance and 3, excluding NOVATEK-Transervice, suppliers Protection, p. 105 NOVATEK-Energo, NOVATEK- Chelyabinsk, Sherwood Premier, 205 Anti-corruption The data on the Company’s water NOVATEK – Western Arctic, withdrawal are obtained based on 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 Sabetta International Airport the state statistic reporting by the Manage topic and its Boundary Group’s subsidiaries available from form ment 103-2 The management approach Business Ethics, p. 52-54 1 2TP-Water approved by Order No. 230 of Approach and its components the Federal State Statistics Service dated 19 October 2009. 103-3 Evaluation of the management 1 approach 303-4 Water discharge Environmental Performance and 3, excluding NOVATEK-Transervice, Protection, p. 104-105 NOVATEK-Energo, NOVATEK-AZK, 205-1 Operations assessed for risks No operations were assessed for risks 1 NOVATEK-Chelyabinsk, Sherwood related to corruption related to corruption. Premier, NOVATEK – Western 205-2 Communication and training Business Ethics, p. 53 1 Arctic, Sabetta International about anti-corruption policies and Airport procedures
205-3 Confirmed incidents of corruption The Company identified no cases of 1 and actions taken corruption in the reporting period.
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Indicator Indicator description Section of the Report / Notes Report Scope Indicator Indicator description Section of the Report / Notes Report Scope index index
303-5 Water consumption Environmental Performance and 3, excluding NOVATEK-Transervice, 305-2 Energy indirect (Scope 2) GHG Environmental Performance and 6, excluding NOVATEK-Energo, Protection, p. 104 NOVATEK-Energo, NOVATEK-AZK, emissions Protection, p. 100-101 NOVATEK-Chelyabinsk, Obskiy NOVATEK-Chelyabinsk, Sherwood LNG, Yamal LNG, Arctic LNG 2 The data on the Company’s water с. CO Premier, NOVATEK – Western 2 discharge are obtained based on Arctic, Sabetta International e. Guidelines approved by Order of the the state statistic reporting by the Airport Russian Ministry of Natural Resources and Group’s subsidiaries available from form Environment No. 330 dated 29 June 2017. 2TP-Water approved by Order No. 230 of the Federal State Statistics Service dated f. Operational control method. 19 October 2009. g. Energy indirect GHG emissions were 304 Biodiversity calculated in accordance with the methodology approved by Order of the 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 3 Russian Ministry of Natural Resources and Manage topic and its Boundary Environment No. 330 “On the Approval of ment 103-2 The management approach Environmental Performance and 3 Guidelines for the Measurement of Energy Approach and its components Protection, p. 92-95, 107-109 Indirect GHG Emissions” dated 29 June 20 17. 103-3 Evaluation of the management 3 approach 305-3 Other indirect (Scope 3) GHG Environmental Performance and 6, excluding NOVATEK-Murmansk emissions Protection, p. 100-101 304-1 Operational sites owned, leased, Environmental Performance and 3
managed in, or adjacent to, Protection, p. 107 b. CO2 protected areas and areas of high 305-4 GHG emissions intensity Climate Change, p. 79 6, excluding NOVATEK-Murmansk biodiversity value outside protected areas Environmental Performance and Protection, p. 102 304-2 Significant impacts of activities, Environmental Performance and NOVATEK-Pur, NOVATEK- products, and services on Protection, p. 110 Yurkharovneftegas, NOVATEK- c. Direct (Scope 1) emissions biodiversity Tarkosaleneftegas, Yargeo, d. CO , CH Yamal LNG 2 4 305-5 Reduction of GHG emissions Environmental Performance and 3 304-3 Habitats protected or restored Environmental Performance and Arcticgas, Arctic LNG Protection, p. 102 Protection, p. 110 2, NOVATEK-Murmansk,
Obskiy LNG, Terneftegas, b. CO2, CH4 NOVATEK-Yurkharovneftegas, e. Guidelines approved by Order of the NOVATEK-Tarkosaleneftegas, Russian Ministry of Natural Resources and NOVATEK – Western Arctic Environment No. 300 dated 30 June 2015. 304-4 IUCN Red List species and national Environmental Performance and 3 305-6 Emissions of ozone-depleting Environmental Performance and 3 conservation list species with Protection, p. 110 substances (ODS) Protection, p. 99 habitats in areas affected by
operations 305-7 Nitrogen oxides (NOX), sulfur oxides Environmental Performance and 3, excluding NOVATEK-Murmansk, (SO ), and other significant air Protection, p. 100 NOVATEK-Chelyabinsk, Sherwood 305 Emissions X emissions Premier, Obskiy LNG b, c. Pollutant emission factors are 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 3 determined based on emission calculation Manage topic and its Boundary methodologies approved by the Russian ment 103-2 The management approach Environmental Performance and 3 Ministry of Natural Resources and Approach and its components Protection, p. 92-95, 99-102 Environment, taking into account industry emission calculation methodologies 103-3 Evaluation of the management 3 depending on emission sources, pollutant approach release parameters, technological 305-1 Direct (Scope 1) GHG emissions Environmental Performance and 6, excluding NOVATEK-Murmansk process, volume and composition of Protection, p. 100-101 fuel used, environmental conditions in the source location area, as well as b. CO , CH 2 4 direct measurements of volume, physical e. Guidelines approved by Order of the properties and composition of emissions Russian Ministry of Natural Resources and as part of industrial environmental Environment No. 300 dated 30 June 2015. control.
f. Operational control method.
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306 Waste 402 Labor/Management Relations
103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 3 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 Manage topic and its Boundary Manage topic and its Boundary ment ment 103-2 The management approach Environmental Performance and 3 103-2 The management approach Employment Practices, p. 132-133 1 Approach Approach and its components Protection, p. 92-95, 102-104 and its components
103-3 Evaluation of the management 3 103-3 Evaluation of the management 1 approach approach
306-1 Waste generation and significant Environmental Performance and 3, excluding Arctic LNG 2, 402-1 Minimum notice periods regarding Under Russian laws, the minimum notice 1, excluding foreign subsidiaries waste-related impacts Protection, p. 102-103 NOVATEK – Western Arctic operational changes period as regards the Company’s and joint ventures significant operational changes is eight 306-2 Management of significant waste- Environmental Performance and 3 weeks (incorporated into the collective related impacts Protection, p. 102-103 bargaining agreement). 306-3 Waste generated Environmental Performance and 3, excluding Arctic LNG 2, 403 Occupational Health and Safety Protection, p. 103 NOVATEK – Western Arctic 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 306-4 Volume of waste directed to Environmental Performance and 3, excluding Arctic LNG 2, Manage topic and its Boundary disposal Protection, p. 103-104 NOVATEK – Western Arctic ment 103-2 The management approach Employee Health, Occupational Health 1 306-5 Waste not directed to disposal Environmental Performance and 3, excluding Arctic LNG 2, Approach and its components and Safety, p. 136-139 Protection, p. 103-104 NOVATEK – Western Arctic 103-3 Evaluation of the management 1 307 Environmental Compliance approach 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 3 403-1 Occupational health and safety Employee Health, Occupational Health 2, excluding NOVATEK-Kamchatka, Manage topic and its Boundary management system and Safety, p. 136-137 Arctic Transshipment, NOVATEK ment 103-2 The management approach Environmental Performance and 3 Gas & Power, Novatek Gas Approach and its components Protection, p. 92-97 & Power Asia, Novatek Asia Development Holding, Novatek 103-3 Evaluation of the management The Company operates in accordance Green Energy, Novatek Equity approach with Russian laws1. (Cyprus), NOVATEK Montenegro, 307-1 Non-compliance with environmental Environmental Performance and 3, including PAO NOVATEK, NOVATEK Lebanon, Yamal Trade laws and regulations Protection, p. 96 NOVATEK-Kostroma 403-2 Hazard identification, risk Employee Health, Occupational Health 2, excluding NOVATEK-Kamchatka, Category: Social assessment, and incident and Safety, p. 140-141 Arctic Transshipment, NOVATEK investigation Gas & Power, Novatek Gas 401 Employment & Power Asia, Novatek Asia 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 Development Holding, Novatek Manage topic and its Boundary Green Energy, Novatek Equity ment (Cyprus), NOVATEK Montenegro, 103-2 The management approach Employment Practices, p. 128-130, 132 1 Approach NOVATEK Lebanon, Yamal Trade and its components 403-3 Occupational health services Employee Health, Occupational Health 2, excluding NOVATEK-Kamchatka, 103-3 Evaluation of the management 1 and Safety, p. 136, 140 Arctic Transshipment, NOVATEK approach Gas & Power, Novatek Gas 401-1 New employee hires and employee Employment Practices, p. 128 1 & Power Asia, Novatek Asia turnover Development Holding, Novatek Appendix 2. Personnel Structure, p. 150-152 Green Energy, Novatek Equity 401-2 Benefits provided to full-time The benefits are provided to all 1 (Cyprus), NOVATEK Montenegro, employees that are not provided to employees. NOVATEK Lebanon, Yamal Trade temporary or part-time employees 403-4 Worker participation, consultation, Employee Health, Occupational Health 2, excluding NOVATEK-Kamchatka, 401-3 Parental leave Appendix 2. Personnel Structure, p. 152 1, excluding Rostock LNG, SMART and communication on occupational and Safety, p. 137, 143 Arctic Transshipment, NOVATEK LNG health and safety Gas & Power, Novatek Gas & Power Asia, Novatek Asia Development Holding, Novatek Green Energy, Novatek Equity (Cyprus), NOVATEK Montenegro, NOVATEK Lebanon, Yamal Trade
1. Hereinafter NOVATEK’s management approach in this area is primarily based on, although may not be limited to, Russian laws.
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403-5 Worker training on occupational Employee Health, Occupational Health 2, excluding NOVATEK-Kamchatka, 404-1 Average hours of training per year Employment Practices, p. 131 2, excluding Arctic LNG 3, Arctic health and safety and Safety, p. 142-143 Arctic Transshipment, NOVATEK per employee Transshipment, Novatek Asia Gas & Power, Novatek Gas Development Holding, NOVATEK & Power Asia, Novatek Asia Lebanon, Sabetta International Development Holding, Novatek Airport, Yamal Trade Green Energy, Novatek Equity 404-2 Programs for upgrading employee Employment Practices, p. 131-132 2, excluding Arctic LNG 3, Arctic (Cyprus), NOVATEK Montenegro, skills and transition assistance Transshipment, Novatek Asia NOVATEK Lebanon, Yamal Trade programs Development Holding, NOVATEK 403-6 Promotion of worker health Employment Practices, p. 133 2, excluding NOVATEK-Kamchatka, Lebanon, Sabetta International Arctic Transshipment, NOVATEK Airport, Yamal Trade Employee Health, Occupational Health Gas & Power, Novatek Gas and Safety, p. 138-139 404-3 Percentage of employees receiving Employment Practices, p. 132 2, excluding Arctic LNG 3, Arctic & Power Asia, Novatek Asia regular performance and career Transshipment, Novatek Asia Development Holding, Novatek development reviews Development Holding, NOVATEK Green Energy, Novatek Equity Lebanon, Sabetta International (Cyprus), NOVATEK Montenegro, Airport, Yamal Trade NOVATEK Lebanon, Yamal Trade 405 Diversity and Equal Opportunity 403-7 Prevention and mitigation of Employee Health, Occupational Health 2, excluding NOVATEK-Kamchatka, occupational health and safety and Safety, p. 137 Arctic Transshipment, NOVATEK 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 impacts directly linked by business Gas & Power, Novatek Gas Manage topic and its Boundary ment relationships & Power Asia, Novatek Asia 103-2 The management approach Employment Practices, p. 128 1 Approach Development Holding, Novatek and its components Green Energy, Novatek Equity The Company operates in accordance 103-3 Evaluation of the management (Cyprus), NOVATEK Montenegro, with Russian laws. approach NOVATEK Lebanon, Yamal Trade 405-1 Diversity of governance bodies and Employment Practices, p. 129 1 403-8 Workers covered by an occupational Employee Health, Occupational Health 2, excluding NOVATEK-Kamchatka, employees health and safety management and Safety, p. 136-137, 140 Arctic Transshipment, NOVATEK Appendix 2. Personnel Structure, p. 148, 152 system Gas & Power, Novatek Gas 405-2 Ratio of basic salary and Wage rates for women and men are based 1 & Power Asia, Novatek Asia remuneration of women to men on equal pay structures at NOVATEK for Development Holding, Novatek the specific type of work performed. Green Energy, Novatek Equity (Cyprus), NOVATEK Montenegro, 406 Non-discrimination NOVATEK Lebanon, Yamal Trade 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 403-9 Work-related injuries Employee Health, Occupational Health 2, excluding NOVATEK-Kamchatka, Manage topic and its Boundary and Safety, p. 137-138, 140-141 Arctic Transshipment, NOVATEK ment 103-2 The management approach Business Ethics, p. 54-55 1 Gas & Power, Novatek Gas Approach and its components & Power Asia, Novatek Asia Employment Practices, p. 128 Development Holding, Novatek 103-3 Evaluation of the management The Company operates in accordance Green Energy, Novatek Equity approach with Russian laws. (Cyprus), NOVATEK Montenegro, NOVATEK Lebanon, Yamal Trade 406-1 Incidents of discrimination and The Company identified no incidents of 1 corrective actions taken discrimination in the reporting period. 403-10 Work-related ill health No occupational diseases were identified 2, excluding NOVATEK-Kamchatka, or registered at NOVATEK over the past Arctic Transshipment, NOVATEK 407 Freedom of Association and Collective Bargaining five years. Gas & Power, Novatek Gas 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 & Power Asia, Novatek Asia Manage topic and its Boundary Development Holding, Novatek ment 103-2 The management approach Employment Practices, p. 54-55 1 Green Energy, Novatek Equity Approach and its components (Cyprus), NOVATEK Montenegro, Business Ethics, p. 128 NOVATEK Lebanon, Yamal Trade 103-3 Evaluation of the management The Company operates in accordance 404 Training and Education approach with Russian laws.
103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 2 407-1 Operations and suppliers in which The Company identified no operations in 1, trade unions are in place in Manage topic and its Boundary the right to freedom of association which the right to exercise freedom of PAO NOVATEK, Terneftegas, ment and collective bargaining may be at association or collective bargaining may NOVATEK-Yurkharovneftegas, 103-2 The management approach Employment Practices, p. 130 2 Approach risk be violated or put at significant risk. NOVATEK-Tarkosaleneftegas, and its components NOVATEK-Purovsky ZPK, 103-3 Evaluation of the management 2 NOVATEK-Transervice, Arcticgas, approach NOVATEK-Energo
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408 Child Labor 415 Public Policy
103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 Manage topic and its Boundary Manage topic and its Boundary ment ment 103-2 The management approach Employment Practices, p. 54-55 1 103-2 The management approach The Company operates in accordance 1, excluding foreign subsidiaries Approach Approach and its components and its components with Russian laws. and joint ventures Business Ethics, p. 128 103-3 Evaluation of the management 103-3 Evaluation of the management The Company operates in accordance approach approach with Russian laws. 415-1 Total value of political contributions NOVATEK does not participate directly or 1 408-1 Operations and suppliers at Business Ethics, p. 54 1 by country and recipient/beneficiary indirectly in political parties, organizations significant risk for incidents of child The Company identified no operations at and foundations associated with them, labor significant risk for incidents of child labor. including not making sponsorship or other payments in support of them. 409 Forced or Compulsory Labor 418 Customer Privacy 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 Manage topic and its Boundary 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 ment Manage topic and its Boundary 103-2 The management approach Employment Practices, p. 54-55 1 Approach ment and its components 103-2 The management approach The Company operates in accordance 1 Business Ethics, p. 128 Approach and its components with Russian laws. 103-3 Evaluation of the management The Company operates in accordance approach 103-3 Evaluation of the management with Russian laws. approach 409-1 Operations and suppliers at Business Ethics, p. 54 1 418-1 Substantiated complaints regarding No substantiated complaints regarding 1 significant risk for incidents of The Company identified no operations at breaches of customer privacy and breaches of customer privacy and losses forced or compulsory labor significant risk for incidents of forced or losses of customer data of customer data. compulsory labor. SECTOR DISCLOSURES 411 Rights of Indigenous Peoples OG1 Volume and type of estimated About the Company, p. 12 1 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 proved reserves and production Annual Report, p. 36-37 Manage topic and its Boundary ment OG2 Total amount invested in renewable Environmental Performance and 1 103-2 The management approach The Company operates in accordance 1 Approach energy Protection, p. 98 and its components with Russian laws. The Company does not disclose the 103-3 Evaluation of the management volume of investments in renewables. approach OG3 Total amount of renewable energy Environmental Performance and 5 411-1 Incidents of violations involving There were no incidents of violations 1 generated by source Protection, p. 97 rights of indigenous peoples involving rights of indigenous peoples. OG4 Number and percentage of Environmental Performance and 3 413 Local Communities significant operating sites in which Protection, p. 107-108 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 biodiversity risk has been assessed Manage topic and its Boundary and monitored ment 103-2 The management approach Stakeholder Engagement, p. 41-42 1 OG5 Volume and disposal of formation or Environmental Performance and 6, excluding NOVATEK-Purovsky Approach and its components produced water Protection, p. 104 ZPK, NOVATEK-Transervice, Social Investments, p. 120 NOVATEK-Murmansk, NOVATEK- 103-3 Evaluation of the management 1 Energo, NOVATEK – Ust- approach Luga, NOVATEK-Chelyabinsk, 413-1 Operations with local community Stakeholder Engagement, p. 41-42 4 Cryogas-Vysotsk engagement, impact assessments, Environmental Performance and OG6 Volume of flared and vented Environmental Performance and 6 and development programs Protection, p. 95 hydrocarbon Protection, p. 101
Social Investments, p. 120 OG7 Amount of drilling waste (drill mud Environmental Performance and 3, excluding Arctic LNG 1, and cuttings) and strategies for Protection, p. 103 NOVATEK – Western Arctic 413-2 Operations with significant actual Stakeholder Engagement, p. 42 4 treatment and disposal and potential negative impacts on local communities OG8 Benzene, lead, and sulfur content in Produced natural gas and LNG are free of 1 fuels benzene and lead, sulfur content is in line with standard values.
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Indicator Indicator description Section of the Report / Notes Report Scope APPENDIX 6. Compliance with SASB index SASB Metric description Information and link to the source Report scope OG9 Operations where indigenous Sustainable Development Strategy, 1 code communities are present or p. 31-36 affected by activities and where GHG EMISSIONS Social Investments, p. 120-122 specific engagement strategies are EM-EP- Gross global Scope 1 emissions 9,055,750 tons of CO2 equivalent 6, excluding NOVATEK-Murmansk in place 110a.1 Percentage of methane 8,475 tons1 OG10 Number and description of Stakeholder Engagement, p. 42 1 significant disputes with local Percentage covered under emissions- Russia lacks legislative regulation of communities and indigenous peoples limiting regulations greenhouse gas emissions.
OG11 Number of sites that have been In 2020, the Group production facilities 1 EM-EP- Amount of gross global Scope Emissions from stationary combustion, 6, excluding NOVATEK-Murmansk decommissioned and sites that were not decommissioned. 110a.2 1 emissions from: (1) hydrocarbon including flaring: 8,852,968 tons of combustion, (2) other combustion, (3) СО equivalent; and are in the process of being 2 process emissions, (4) other vented decommissioned fugitive emissions: 166,816 tons of emissions, and (5) fugitive emissions CO equivalent. OG12 Operations where involuntary Stakeholder Engagement, p. 42 1 2 resettlement took place, the The Company does not disclose process number of households resettled in and other vented emissions. each and how their livelihoods were affected in the process EM-EP- Description of emission reduction Details are available in the Environmental 6, excluding NOVATEK-Murmansk 110a.3 targets and long-term and short-term Performance and Protection section, p. 77. OG13 Number of process safety events, Employee Health, Occupational Health 2 strategies or plans to manage Scope by business activity and Safety, p. 137, 140, 143 1 GHG emissions, and an analysis of OG14 Volume of biofuels produced and The Company does not produce or 1 performance against these targets purchased meeting sustainability purchase biofuel. AIR QUALITY criteria EM-EP- Air pollutant emissions: 3, excluding NOVATEK-Murmansk, SPECIFIC MATERIAL TOPICS RELEVANT FOR NOVATEK 120a. 1 NOVATEK-Chelyabinsk, (1) NOX (excluding N2O) 11,082.6 tons (as NO2 equivalent) Innovation Sherwood Premier, Obskiy LNG
(2) SOX 77.4 tons 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 Manage topic and its Boundary (3) volatile organic compounds (VOCs) 13,417.8 tons (sulfur dioxide) ment 103-2 The management approach Innovation, p. 22-25 1 (4) particulate matter 5,590.3 tons Approach and its components WATER MANAGEMENT
103-3 Evaluation of the management 1 EM-EP- Total fresh water withdrawal 1,952 mcm 3, excluding NOVATEK- approach 140a. 1 Transervice, NOVATEK- Total freshwater consumption 1,952 mcm Information Security Energo, NOVATEK-Chelyabinsk, Percentage of freshwater withdrawal/ The Company does not operate in areas Sherwood Premier, NOVATEK – 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 consumption in areas of high or with water stress. The International Western Arctic, Sabetta Manage topic and its Boundary extremely high water stress Water Management Institute and World International Airport ment 103-2 The management approach Information Security, p. 55-56 1 Resources Institute’s Water Risk Atlas Approach and its components tool classified Russia as a region with abundant water resources. 103-3 Evaluation of the management 1 approach EM-EP- Volume of water produced and Volume of water produced from 6, excluding NOVATEK-Purovsky 140a. 2 flowback generated; percentage of (1) production wells: 4,531 mt; and ZPK, NOVATEK-Transervice, Impact of the COVID-19 Pandemic on the Company’s Business, and the Company’s Response to the Pandemic discharged, (2) injected, (3) recycled NOVATEK-Murmansk, NOVATEK- from water withdrawal wells: 3,232 mt. 103 103-1 Explanation of the material Appendix 1. About the Report, p. 145-147 1 water Energo, NOVATEK – Ust-Luga, Manage topic and its Boundary Water injected for reservoir pressure NOVATEK-Chelyabinsk, ment maintenance: 5,538 mt. Cryogas-Vysotsk 103-2 The management approach The COVID-19 Pandemic’s Impact on 1 Approach and its components Strategy, p. 36 Discharged and recycled water data is not consolidated at the Group level. 103-3 Evaluation of the management Employee Health, Occupational Health 1 approach and Safety, p. 138-139 Hydrocarbon content in discharged The Company does not discharge 3, excluding NOVATEK- water hydrocarbon contaminated water into Transervice, NOVATEK- water bodies. Energo, NOVATEK-Chelyabinsk, Sherwood Premier, NOVATEK – Western Arctic, Sabetta International Airport
1. 2020 methane emissions volume.
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SASB Metric description Information and link to the source Report scope SASB Metric description Information and link to the source Report scope code code
EM-EP- Percentage of hydraulically fractured 0% 6, excluding NOVATEK-Purovsky Details on employee and contractor 140a. 3 wells for which all frac-turing fluid ZPK, NOVATEK-Transervice, training are available in the Employee Hydraulic fracturing was performed using chemicals used are disclosed NOVATEK-Murmansk, NOVATEK- Health, Occupational Health and Safety viscoelastic fluids, all fracturing fluid Energo, NOVATEK – Ust-Luga, section, p. 143 chemicals used are not disclosed. NOVATEK-Chelyabinsk, EM-EP- Description of management systems Details are available in the Occupational 1 Cryogas-Vysotsk 320a. 2 used to integrate a safety culture Health and Safety section, p. 136 EM-EP- Percentage of hydraulic fracturing sites This information is not consolidated at 3, excluding NOVATEK- throughout the exploration and 140a. 4 where ground or surface water quality the Group level. The Company does not Transervice, NOVATEK- production lifecycle deteriorated compared to the baseline discharge hydrocarbon contaminated Energo, NOVATEK-Chelyabinsk, EVALUATION OF RESERVES AND CAPITAL EXPENDITURES water into water bodies. Sherwood Premier, NOVATEK – Western Arctic, Sabetta EM-EP- Sensitivity of hydrocarbon reserve levels This information is not consolidated at the 1 International Airport 420a. 1 to future price projection scenarios that Group level. account for carbon price BIODIVERSITY IMPACTS Details are available in the Climate EM-EP- Description of environmental Details are available in the Environmental 3 Change section, p. 82
160a. 1 management policies and practices for Performance and Protection section, 3 EM-EP- Estimated (potential) GHG emissions 4,797 mmt of CO2 equivalent (for natural 1 existing plants p. 92. 420a. 2 from proved hydrocarbon reserves gas, oil and gas condensate reserves) EM-EP- Number and aggregate volume of There were no spills exceeding 1 barrel 1 EM-EP- Investments in renewable energy, The Company does not disclose the 1 160a. 2 hydrocarbon spills, volume of spills in the volume in 2020 420a. 3 revenue generated by renewable energy volume of investments in renewable Arctic, volume impacting shorelines with sales energy. The Company does not sell energy ESI rankings 8–10, and volume recovered from renewables. EM-EP- Percentage of (1) proved and (2) This information is not consolidated at the 3 Details on the use of renewables are 160a. 3 probable reserves in or near protected Group level. available in the Environmental Performance areas or habitats of endangered species and Protection section, p. 97 SECURITY, HUMAN RIGHTS AND RIGHTS OF INDIGENOUS PEOPLES EM-EP- Descriptions of the influence of price Management continues to closely monitor 1 EM-EP- Percentage of (1) proved and (2) probable 0% 1 420a. 4 and demand for hydro-carbons and/ the economic and political environment in 210a. 1 reserves in or near conflict areas or climate regulation on the capital Russia and abroad, including the domestic EM-EP- Percentage of (1) proved and (2) probable 100% Company’s reserves are located in 1, excluding foreign subsidiaries expenditure strategy for exploration, and international capital markets, to 210a. 2 reserves in or near indigenous land indigenous land1. and joint ventures acquisition and development of assets determine if any further corrective and/or preventive measures are required to sustain EM-EP- Discussion of stakeholder engagement Details are available in the Business Ethics 1 and grow our business. We also closely 210a. 3 processes and responsible practices section, p. 54 monitor the present commodity price with respect to human rights, indigenous The Company does not operate in conflict environment and its impact on our business rights, and operation in conflict areas areas. operations. We do not expect any asset impairments or write-offs resulting from a ENGAGEMENT WITH LOCAL COMMUNITIES lower commodity price environment. EM-EP- Description of the process to manage Details are available in the Business Ethics 1 210b.1 risks and opportunities associated with section, p. 54 Risks and opportunities associated with community rights and interests climate change are taken into account in the Company’s Business Strategy. The EM-EP- Number and duration of non-technical The Company has never seen a single 1 Company constantly monitors market 210b.2 delays case of stoppages or strikes due to labor trends, keeps track of changes in legislation disputes. regulating greenhouse gas emissions, EMPLOYEE HEALTH AND SAFETY assesses the impact of such changes and updates its plans accordingly, invests into EM-EP- (1) Total recordable incident rate (TRIR) Injuries frequency rate2 was 0.81 1 development of innovative energy-efficient 320a. 1 (2) Fatality rate There were no fatalities among employees zero-emission technologies, considers risks in 2020 and opportunities of current and expected (3) Near miss frequency rate environmental conditions to efficiently Near miss frequency rate is not (4) Average hours of health and safety, manage the project portfolio and maintain consolidated at the Group level. and emergency response training for sustainable development. a) full-time employees, b) contractors’ Information on average hours of health Details are available in the Management’s employees, and c) part-time employees and safety, and emergency response Discussion and Analysis of Financial training is not consolidated at the Group Condition and Results of Operations for level for listed categories of employees. the Year Ended 31 December 2020, p. 10 and in the Climate Change section, p. 78 1. According to the Decree of the Government of the Russian Federation No. 1049 “On approval of the list of indigenous peoples of the North and the list of areas of residence of indigenous peoples of the North in order to establish a social pension for old age”. 2. Number of injuries divided by the average headcount. 3. Calculations use the methodology of the World Resources Institute.
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SASB Metric description Information and link to the source Report scope APPENDIX 7. TCFD Disclosure Index code Section Disclosure element Information and link to the source BUSINESS ETHICS AND TRANSPARENCY CORPORATE GOVERNANCE EM-EP- Percentage of (1) proved and (2) 0% 1 510a.1 probable reserves in countries with the Disclosure of the Description of the Key climate change topics, including corporate governance, strategy, bottom 20 rankings in Transparency organization’s board’s oversight of risk management, and climate change targets, are the responsibility of International’s Corruption Perception governance around climate change risks the Company’s top management and are reviewed at the meetings of Index climate change risks and opportunities NOVATEK’s Board of Directors. and opportunities EM-EP- Description of the system for preventing Details are available in the Business Ethics 1 Details are available in the Climate Change section, p. 76-77. 510a.2 corruption and bribery throughout the section, p. 52 Description of the Issues related to GHG emissions fall within the authority of NOVATEK’s value chain management’s role top management, and in particular Deputy Chairman of the Management MANAGEMENT OF THE LEGAL AND REGULATORY ENVIRONMENT in assessing and Board – Operations Director, who is responsible for the Integrated HSE managing climate Management System. EM-EP- Description of corporate positions Details are available in the Sustainable 1 change risks and 530a.1 related to government regulations Development Strategy section, p. 28, and opportunities and/or policy proposals that address in the Climate Change section, p. 76 environmental and social factors STRATEGY affecting the industry Disclosure of the actual Description of the The Company identifies the following climate risks: transition risks (strategic CRITICAL INCIDENT RISK MANAGEMENT and potential impacts climate change risks risk, carbon price risk, technology risk, market risk, legislative risk, and of climate change and opportunities reputational risk) and physical impact risks (risk caused by long-term EM-EP- The rate of process safety event This information is not consolidated at the 1 risks and opportunities the organization has climate change and risk caused by severe short-term impacts). 540a. 1 (PSE) resulting in the loss of primary Group level. on the organization’s identified over the Details are available in the Climate Change section, p. 78-81. containment (LOPC) or graver business, strategy, short, medium, and consequences and financial planning long term where such information EM-EP- Description of management systems NOVATEK does not consider specific 1 Description of the Details are available in the Climate Change section, p. 78-79 is material 540a. 2 used to identify and mitigate “black swans” (risks with extremely low impact of climate catastrophic and tail-end risks probability but catastrophic damage: change risks and bankruptcy of the Company, complete opportunities on loss of the customer base, mass outflow the organization’s of personnel, or dismissal of an entire business, strategy, and key department, ineffective research/ financial planning development). The risk map identifies risks with the maximum possible loss Description of The Company considers climate scenarios while designing the large- under major scenarios of technological the resiience of scale LNG projects Yamal LNG and Arctic LNG 2. The standard method to accidents. the organization’s identify the climatic conditions under which LNG projects can be designed strategy, taking into or to identify the realistic in-use climatic conditions for the equipment Details are available in the Corporate consideration different is the consideration of historical data as part of the engineering and Governance section, p. 68 climaterelated hydrometeorological surveys. As to future LNG projects, the risk of climate PERFORMANCE scenarios, including the warming will be forecast on a project-specific basis. 2 °C or lower scenario EM-EP- Production1 of: 1 Details are available in the Climate Change section, p. 82. 000. A (1) oil 4,830 mt RISK MANAGEMENT
(2) natural gas 77.4 bcm Disclosure the Description of The Company analyzes climate change risks on an annual basis in order to processes used by the the organization’s properly address them and work out appropriate management measures. (3) synthetic oil The Company does not produce synthetic organization to identify, processes for NOVATEK has a procedure for assessing climate change risks relating to oil or gas. (4) synthetic gas assess and manage identifying and its physical impact on the Company’s operations at the facility design, climate change risks assessing climate construction and operation stages as well as when preparing surveyor’s EM-EP- Number of offshore license blocks 2 license areas located completely in change risks reports for risk insurance purposes. This procedure is a standard element of 000. B water areas NOVATEK’s Environmental Management System certified to ISO 14001:2015. EM-EP- Number of onshore license blocks 70 fields and license areas Details are available in the Climate Change section, p. 78-79. 000. C
1. Production volumes in 2020.
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Section Disclosure element Information and link to the source APPENDIX 8. Independent Auditor’s Assurance
Description of Climate change risk management is an integral part of NOVATEK’s multi- Independent Limited Assurance Report the organization’s tier risk management system. Climate change risks are identified, analyzed processes for and assessed by risk owners (heads of business lines and structural units) To the management of PAO NOVATEK: managing climate in coordination with the Risk Control Division. Risks are identified in line with change risks a classification according to the recommendations of the Task Force on Introduction • establishing internal methodology, including objective Climate-related Financial Disclosures (TCFD). Materiality of climate change reporting criteria, and guidelines for preparing and risks is analyzed against the same criteria that are used to assess other We have been engaged by the management of PAO reporting the Selected Information in accordance with types of risks, including probability and financial impact. NOVATEK (the “Company”) to provide limited assurance the Reporting Criteria; on the selected information described below and included Details are available in the Climate Change section, p. 78-79. in the Sustainability Report of the Company for the year • preparing, measuring and reporting of the Selected ended 31 December 2020 (the “Sustainability Report”). Information in accordance with the Reporting Criteria; and Description of NOVATEK’s business strategy recognizes risks and opportunities related to how processes for climate change. The Company regularly monitors market trends, considers The Sustainability Report presents information related • the accuracy, completeness and presentation of the identifying, assessing the risks and opportunities of current and expected environmental to the Company and its subsidiaries and affiliates Selected Information. and managing climate conditions to efficiently manage the project portfolio and maintain (together – the “Group”). change risks are sustainable development, keeps track of changes in legislation regulating Our responsibilities integrated into the greenhouse gas emissions, assesses the impact of such changes and Selected Information organization’s overall updates its plans accordingly, and invests into the development of We are responsible for: risk management innovative energy-efficient zero-emission technologies. We assessed the qualitative and quantitative information system that is disclosed in the Sustainability Report and referred • planning and performing the engagement to obtain to or included in the Appendix 5 “Compliance with the GRI limited assurance about whether the Selected Details are available in the Climate Change section, p. 78-79. Standards” and in the Appendix 6 “Compliance with SASB” Information is free from material misstatement, whether (the “Selected Information”). The Selected Information due to fraud or error; METRICS AND TARGETS has been prepared in accordance with: Disclosure of the Disclosure of the Details are available in the Environmental Performance and Protection • forming an independent conclusion, based on the metrics and targets metrics used by the section, p. 100-102: Scope 1, 2 and 3 GHG emissions; potential GHG • GRI Sustainability Reporting Standards (Core option), procedures we have performed and the evidence we used to assess and organization to assess emissions; Scope 1 GHG emissions with a breakdown into emissions from including GRI G4 Oil & Gas Sector Disclosures (together – have obtained; and manage relevant climate change risks stationary combustion (including flaring) and fugitive emissions. the “GRI Standards”) published by the Global Reporting climate change risks and opportunities in Initiative; • reporting our conclusion to the Company’s management. Details are available in the Management’s Discussion and Analysis of and opportunities line with its strategy Financial Condition and Results of Operations for the Year Ended 31 where such information and risk management • Oil & Gas Exploration & Production Sustainability This report, including our conclusion, has been prepared December 2020, p. 22: oil and gas production lifting costs. is material process Accounting Standard (the “SASB Standard”) published solely for the Company’s management in accordance with by the Sustainability Accounting Standards Board the agreement between us, to assist the management
Disclosure of Scope Total Scope 1 emissions: 9,055,750 tons of CO2 equivalent; (SASB), respectively. in reporting on the Group’s sustainability performance 1, Scope 2 and, if and activities. We permit this report to be disclosed in Total Scope 2 emissions: 228,498 tons of CO equivalent; and appropriate, Scope 2 The scope of our limited assurance procedures was the Sustainability Report, which may be published on
3 GHG emissions and Total Scope 3 emissions: 173,250,940 tons of CO2 equivalent. limited to the Selected Information for the year the Company’s website1, to assist the management related risks ended 31 December 2020. We have not performed any in responding to their governance responsibilities by Details are available in the Environmental Performance and Protection procedures with respect to any other items included in obtaining an independent limited assurance report in section, p. 100-102. the Sustainability Report and, therefore, do not express connection with the Selected Information. To the fullest Description of the In August 2020, NOVATEK’s Board of Directors approved the Company’s any conclusion thereon. extent permitted by law, we do not accept or assume targets used by Environmental and Climate Change targets for the period up to 2030, responsibility to anyone other than the management of the organization including emissions reduction and increase in the associated petroleum gas Reporting Criteria the Company for our work or this report. to manage climate utilization rate. change risks and We assessed the Selected Information using relevant Professional standards applied and level of assurance Details are available in the Climate Change section, p. 76, and in the criteria, including reporting principles and requirements, in opportunities and Environmental Performance and Protection section, p. 93-94 the GRI Standards and the SASB Standard (the “Reporting performance against Criteria”). We believe that the Reporting Criteria are We performed a limited assurance engagement in targets appropriate given the purpose of our limited assurance accordance with International Standard on Assurance engagement. Engagements 3000 (Revised) “Assurance Engagements other than Audits or Reviews of Historical Financial Responsibilities of the management of the Company Information’’ issued by the International Auditing and Assurance Standards Board. A limited assurance The Company’s management is responsible for: engagement is substantially less in scope than a reasonable assurance engagement in relation to both the • designing, implementing and maintaining internal risk assessment procedures, including an understanding controls relevant to the preparation of the Selected of internal control, and the procedures performed Information that is free from material misstatement, in response to the assessed risks. The procedures whether due to fraud or error; performed in a limited assurance engagement vary
1. The maintenance and integrity of the Company’s website is the responsibility of the Management; the work carried out by us does not involve consideration of these matters and, accordingly, we accept no responsibility for any changes that may have occurred to the reported Selected Information or Reporting Criteria when presented on the Company’s website.
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in nature and timing from, and are less in extent than systems, processes and controls for managing, Social Media and Contact Details Queries to NOVATEK: for, a reasonable assurance engagement. Consequently, recording, preparing and reporting the Selected the level of assurance obtained in a limited assurance Information; To post interesting facts and up-to-date information • Central Information Service: +7 495 730 6000, engagement is substantially lower than the assurance about the Company and receive feedback from [email protected] that would have been obtained had a reasonable • performed limited substantive testing on a selective stakeholders, NOVATEK uses social media pages on assurance engagement been performed. basis of the Selected Information to check that data • Security Hotline: +7 495 232 3959, had been appropriately measured, recorded, collated https://www.instagram.com/novatek_photos [email protected] Our Independence and Quality Control and reported; and https://www.facebook.com/NOVATEK.eng/ • Sustainable development: Alexander Nazarov, We have complied with the independence and other • reviewed the Selected Information for compliance of Head of IR, +7 495 730 6013, [email protected] ethical requirements of the International Code of Ethics the disclosures with the relevant requirements of the https://vk.com/novatek_ru for Professional Accountants (including International Reporting Criteria. • Press Service: +7 495 721 2207, [email protected] Independence Standards) issued by the International https://www.youtube.com/c/NOVATEKgas Ethics Standards Board for Accountants (IESBA Code), Reporting and measurement methodologies • Investor Relations: Mark Gyetvay, Deputy Chairman of which is founded on fundamental principles of integrity, https://twitter.com/NOVATEK_ the Management Board; Alexander Nazarov, Head of IR, objectivity, professional competence and due care, Under the GRI Standards and SASB Standard there is + 7 495 730 6013, [email protected] confidentiality and professional behaviour, and the ethical a range of different, but acceptable, measurement requirements of the Auditor’s Professional Ethics Code and reporting techniques. The techniques can result in • Ethics and human rights: [email protected] and Auditor’s Independence Rules that are relevant to our materially different reporting outcomes that may affect limited assurance engagement in respect of the Selected comparability with other organisations. The Selected • Customer Account service on the Company’s website: Information in the Russian Federation. We have fulfilled Information should therefore be read in conjunction with http://www.novatek.ru/en/business/marketing/ our other ethical responsibilities in accordance with these the methodology used by the management in preparing requirements. the Sustainability Report, described therein, and which the Company is solely responsible for. Our firm applies International Standard on Quality Contact details for queries about Control 1 and accordingly maintains a comprehensive Limited assurance conclusion the Yamal LNG project: system of quality control including documented policies and procedures regarding compliance with ethical Based on the procedures we have performed and the • Tel: +7 495 775 0480, +7 495 228 9850 (calls requirements, professional standards and applicable legal evidence we have obtained, nothing has come to our are transferred to the Company’s designated and regulatory requirements. attention that causes us to believe that the Selected representatives) Information for the year ended 31 December 2020 has not Work done been prepared, in all material respects, in accordance • E-mail: [email protected] with the Reporting Criteria. We are required to plan and perform our work in order • Security Hotline: +7 499 941 1445, [email protected] to consider the risk of material misstatement of the Selected Information. In doing so, we: • HSE: [email protected]
• made enquiries of the Company’s management, including 25 June 2021 • Feedback and suggestion boxes installed in community the Sustainability Reporting (SR) team and those with Moscow, Russian Federation liaison offices in the villages of Seyakha and Mys responsibility for SR management and Group reporting; Kamenny
• conducted interviews of personnel responsible for the • Community liaison offices in Salekhard, Yar-Sale, preparation of the Sustainability Report and collection and Sabetta of underlying data;
• performed an analysis of the relevant internal methodology and guidelines, gaining an understanding M.E. Timchenko, certified auditor (licence No. 01-000267), Contact details for queries about and evaluating the design of the key structures, AO PricewaterhouseCoopers Audit the Arctic LNG 2 project:
• Tel: +7 495 720 5053 Audited entity: PAO NOVATEK Independent auditor: AO PricewaterhouseCoopers Audit • Mikhail Lapsui, representative of Arctic LNG Record made in the Unified State Register of Legal Entities Registered by the Government Agency Moscow Registration 2 in the Tazovsky District on 20 August 2002 under State Registration Number Chamber on 28 February 1992 under No. 008.890 1026303117642 Record made in the Unified State Register of Legal Entities Taxpayer Identification Number 6316031581 on 22 August 2002 under State Registration Number 1027700148431 Tarko-Sale, Purovsky District, Yamal-Nenets Autonomous District, Russian Federation Taxpayer Identification Number 7705051102
Member of Self-regulatory organization of auditors Association «Sodruzhestvo»
Principal Registration Number of the Record in the Register of Auditors and Audit Organizations – 12006020338
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Glossary OHSAS – Occupational Health and Safety Management Systems
Abbreviations OOO – limited liability company
AO – joint stock company PAO – public joint stock company
APG – associated petroleum gas PPE – personal protective equipment
CDO – Central Dispatch Office PUE – Electrical Installation Regulation
CDP – Carbon Disclosure project RAS – Russian Accounting Standards
EBITDA – earnings before interest, taxes, depreciation and RSPP – the Russian Union of Industrialists and amortization Entrepreneurs
EBSA – ecologically and biologically significant marine area SASB – Sustainability Accounting Standards Board
EI – Engagement International SEC – US Securities and Exchange Commission
EIA – Environmental Impact Assessment SGC – stable gas condensate
EITI – Extractive Industries Transparency Initiative SNiP – building regulations
E&P – exploration & production STRs – special technical requirements
ESG (environmental, social and governance) – a concept, TCFD – Task Force on Climate-related Financial according to which a company’s sustainable development Disclosures is measured by environmental, social and corporate UN SDGs – United Nations Sustainable Development Goals governance factors UN – the United Nations FCA – UK Financial Conduct Authority VOCs – volatile organic compounds GBS – gravity-based structure WWF – the World Wildlife Fund for Nature GDR – global depositary receipt ZAO – closed joint stock company GHG – greenhouse gas
GIS – geographic information systems Units
GOST – intergovernmental standard bcm – billion cubic meters
GRI – Global Reporting Initiative bln – billion
HPF – hazardous production facility boe – barrels of oil equivalent
HSE – health, safety and environment GJ – gigajoule
IEA – International Energy Agency ha – hectare
IFRS – International Financial Reporting Standards km – kilometer
IMS – Integrated HSE Management System kWh – kilowatt hour
IPIECA – International Petroleum Industry Environmental mboe – thousand barrels of oil equivalent Conservation Association mcm – thousand cubic meters ISO – International Organization for Standardization mln – million ISS – Institutional Shareholder Services mmboe – million barrels of oil equivalent KPI – key performance indicators mmcm – million cubic meters LNG – liquefied natural gas mmt – million tons MSCI – Morgan Stanley Capital International mmtpa – million tons per annum NGV – natural gas vehicle mt – thousand tons NSR – the Northern Sea Route mtpa – thousand tons per annum OAO – open joint stock company MW – megawatt OHS – occupational health and safety ton – metric ton
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