Russian state controlled oil producer Gazprom Neft has teamed up with a subsidiary of the country’s state owned nuclear conglomerate Rosatom to join its pilot project to produce blue hydrogen from natural gas on Sakhalin Island.

According to the agreement signed between Gazprom Neft and Rosatom Overseas, the oil producer will research the possibilities of transporting and storing carbon dioxide to be captured during production of hydrogen on the island in Russia's far east.

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The two companies will also consider joint cooperation in researching decarbonisation options for energy transition projects elsewhere in the country.

Gazprom Neft has repeatedly said it has accumulated valuable CCS experience after starting a pilot project in 2015 at the Rusanda oilfield in Serbia, which is operated by its local oil and gas producing joint venture NIS.

However, the Rusanda project has been driven forward by the need to increase the field’s recovery rate rather than to completely eliminate CO2 emissions from operations.

Rosatom Overseas plans to start trial hydrogen production at its Sakhalin facility in 2024 and may produce between 30,000 and 100,000 tonnes per annum of hydrogen.

The company is seeking technical assistance from France’s Air Liquide in designing the facility.

Russian authorities have allocated Sakhalin as a testing ground for various industry initiatives for the region to reach carbon neutrality as early as 2025, with public transportation, from cars and buses to trains to switch to hydrogen fuel as part of the push to control greenhouse gas emissions.

While the planned Rosatom facility will serve as a source of fuel for Sakhalin, exports of produced hydrogen to Japan are also on cards as the Russian conglomerate is reportedly aiming to capture a sizeable share of the Japanese hydrogen market.

Earlier in September, Rosatom signed a wide-ranging cooperation agreement with Russian gas monopoly Gazprom and Sakhalin authorities to support its ambitions to produce and distribute hydrogen on the island and switch consumers to using hydrogen as fuel.