Russian state-controlled oil producer Gazprom Neft has updated its long-term development strategy to answer energy transition challenges, setting goals of prioritising gas development projects and using its legacy fields to store captured carbon dioxide.

Speaking earlier this week in Dubai, Gazprom Neft's head of strategy and innovations department, Sergey Vakulenko, said the company envisages demand for natural gas will remain for a “long time” ahead.

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The producer will “strive to keep gas available to the demand that might be stagnant or declining, but will not vanish”, he said.

Natural gas focus

Gazprom Neft is looking to expand, with the goal for gas to account for 50% of its total hydrocarbon output by 2030.

According to an earlier statement, the company produced about 358 billion barrels of oil equivalent between January and June, with gas accounting for 22% of its output.

First deputy chief executive officer Vadim Yakovlev said the Russian Arctic will remain a major growth region for Gazprom Neft because of its significant resources.

Gazprom Neft’s Arctic projects on Russia's Yamal Peninsula already account for 30% of the company’s hydrocarbon production and 50% of its investments, Yakovlev said.

“Our competitive advantage of operating successfully in the Arctic will allow Gazprom Neft to grow ahead of the [Russian oil and gas] industry over the next decade. The company is focusing on gas and condensate, which will account for 80% of the anticipated production increase over the next decade,” he added.

Gazprom Neft is developing deep gas reservoirs of the Kharasavey and Bovanenkovo fields where plateau production of more than 112 million cubic metres of gas per day is expected.

“With total unit cost of production at these fields of approximately $5 per barrel of oil equivalent, the management is confident that Gazprom Neft will remain competitive while decreasing its carbon footprint,” Yakovlev said.

CCS and hydrogen opportunities

Vakulenko said that carbon capture and storage will be required to achieve net-zero targets. Therefore, Gazprom Neft is looking forward to developing capabilities in this area and offering CCS services to power generation companies and heavy industries.

“Carbon capture, utilisation and storage today costs from $60 to $120 per tonne. It is a mature technology which makes the potential for cost reduction limited," he said.

“Gazprom Neft would welcome more efficient policies [to stimulate such projects] being pursued” by governments.

Gazprom Neft expects to reach zero flaring of bypass gas by 2030 and also bring down its scope 1 and 2 carbon dioxide emissions by 30% to about 20.2 million tonnes of CO2 equivalent.

The company also plans to provide hydrogen supply to areas and industries that are difficult to electrify, such as steel industry or long-distance transport.

Blue hydrogen from steam methane reforming with CCS is by far “the most attainable method of low-carbon mass production hydrogen at sight”.

“Gazprom Neft believes policies related to [the expansion of the use of] hydrogen should preliminary focus on emissions and not on raw materials used or processes involved”, Vakulenko said.

Russian gas monopoly Gazprom has a 95% stake in Gazprom Neft, however, the oil producer has enjoyed a fair degree of operating independence from its parent that has yet to reveal any coherent plan on its energy transition goals.