Russia has vast potential to tap into the growing global decarbonisation market, with the development of carbon sinks as well as carbon capture, utilisation and storage (CCUS) facilities presenting a huge opportunity set for the oil and gas producing powerhouse, according to Lukoil's Leonid Fedun.
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Speaking in an interview with Moscow business daily Kommersant, the outspoken vice president of the privately held oil giant said Russia is blessed with vast swathes of territory where it could establish specialised farms to cultivate fast-growing varieties of trees to absorb carbon dioxide in huge quantities.
CCUS also provides a major opportunity for Russian oil and gas producers' long-term business prospects, he argued, as the country is well positioned to become a global leader in removing excess CO2 at its production hubs.
For these projects to move forward, Russian authorities and businesses must work together closely.
“We need political will and initiative”, Fedun said.
He cautioned, however, that obtaining European and global certifications for such projects would take time.
In his view, the country has limited time to expand its carbon capture business. In 2025, Russian energy exporters may face stricter European regulations on carbon emissions, potentially meaning higher tariffs on exports.
Emission trading
Fedun called for the establishment of a Russian voluntary “emission-trading system” that will allow oil and gas exporters to offset their CO2 emissions by teaming up with other companies to operate carbon capture farms and hubs in the country.
Carbon capture farms could plant Paulownia trees, which Fedun said can capture the highest volume of CO2 during their early years of fast growth compared with other plants.
CCUS hubs could deal with the CO2 captured during oil production and refining, and would store it in exhausted fields, using renewable energy sources for power, Fedun said.
Once carbon farms and hubs are established on a large scale in the country, Russia can start “trading decarbonised air” to offset emissions from its own oil and gas production, also providing such offset options on the international market.
Oil still attractive
Fedun added that Lukoil sees no need to imminently switch to renewables, as its oil business remains many times more profitable than renewable energy projects.
But the company will invest in CCUS projects despite the high costs, which he believes will decrease rapidly with the arrival of new and better technologies.
The executive said he expects the first CCUS hub to be built on Sakhalin Island in the far east of the country.
Rosneft takes aim at wind power
Meanwhile, Russia's largest oil producer, Rosneft, recently revealed that it is considering building wind farms at a cluster of its oil and gas greenfield sites, known as Vostok Oil, in the Krasnoyarsk region in East Siberia.
Vostok Oil is expected to ramp up hydrocarbon output significantly after 2035, and Rosneft is aiming to export all of the produced oil and gas rather than reserve any for the domestic market.
A Rosneft executive said on a recent conference call that, based on initial estimates, using wind farms could reduce lifetime emissions of CO2 at Vostok Oil to 12 kilograms per barrel of production, against an estimated average of 50 kilograms for new developments with no such facility.
