Gazprom Neft Completes Preparation for Sale of Emission Reduction Units (ERUs) under Kyoto Protocol

Gazprom Neft has completed preparation for the sale of 290,000 ERUs, obtained during execution of a Joint Implementation (JI) Project at the Company's Yety-Purovskoe field in accordance with the mechanism envisaged by the Kyoto Protocol.

Functions under the JI Project are distributed based on the assumption that the end users of ERUs will be sought by Gazprom Neft's Japanese partners, Mitsubishi Corporation and JX Nippon Oil & Energy Corporation at the final stage of the project. In accordance with the procedure approved by the Government of the Russian Federation, the ERU sale is conducted with the direct involvement of Sberbank of Russia.

The JI Project at the Yety-Purovskoe field was registered with the Russian Registry of Carbon Units in December 2010. Also, the project was assigned a number in the International Transaction Log (ITL). The ITL is an international registry of transactions pertaining to the transfer of carbon units between the countries under the Kyoto Protocol.

Registration of carbon units in the registry and in the transaction log has turned the sale of the ERUs obtained under the JI Project in accordance with the results of the verification performed in August 2010 into a practical task. During the verification and based on a comprehensive review of specified documents, independent experts confirmed that the declared emission reductions did reflect the reality, and the recovery of associated petroleum gas (APG) fully complied with the requirements of the Kyoto Protocol in respect to the process. The verification confirmed the possibility of selling 290,000 ERUs obtained within the period from August 2009 to December 2009.

Execution of the JI Project will allow Gazprom Neft to obtain up to 3.1 mln. ERUs (each unit corresponds to 1 tonne of СО2) starting from the facility commissioning in August 2009 and until December 2012. ERU sale on the external market provides additional funds for the project, which substantially improves economic parameters of APG use for the intended purpose and positively affects the project's ROI.

A pipeline from the Yety-Purovskoe field running for more than 70 km has been constructed as part of JI Project execution. This has enabled the routing of APG from the field to the Vyngayakhinskaya compressor station for further processing at SIBUR's Vyngapurovskaya compressor station.

The JI Project at the Yety-Purovskoe field is implemented in association with the Japanese Mitsubishi Corporation and JX Nippon Oil & Energy Corporation, which have already gained a positive experience of work within the frames of the Kyoto Protocol.

Reference

The Kyoto Protocol is an international document adopted in Kyoto (Japan) in December 1997 in addition to the United Nations Framework Convention on Climate Change (UNFCCC). Under the Protocol, both developed and emerging countries shall reduce or stabilize greenhouse gas emissions in 2008-2012 as compared to the year 1990.

Gazprom Neft's JI Project has become the first Russian-Japanese project implemented in accordance with Kyoto Protocol regulations. It is the first Russian project, which has been approved by the Government of Japan.

In the beginning of July 2010, Gazprom Neft and its partners received the project approval at Sberbank of the Russian Federation, which is authorized by the Government of the Russian Federation to carry out the procedure of JI Project competitive selection. Besides, the project is included in the approved list of projects executed in accordance with Article 6 of the Kyoto Protocol to the United Nations Framework Convention on Climate Change.