• Naftogaz is aware of its responsibility to the present and future generations for the environmental impact. Harmonizing economic interests of Naftogaz enterprises with environmental and social interests of the society is one of the company's main priorities.

    ENVIRONMENT AND SAFETY MANAGEMENT SYSTEM

    Basic principles of Naftogaz environmental policy

    Naftogaz operates in the field of environmental protection according to the corporate Environmental policy.

    Environmental policy forms the basis for the compan's environmental strategy, environmental protection plans and activities, natural resource management, improvements in environmental safety of production facilities.

    Naftogaz has been designing and implementing a number of actions related to sustainable use of water resources, air, mineral resources and land, as well as to waste management, based on objectives and goals of the National Environmental Policy of Ukraine until 2020 and other regulations. The company is implementing its Comprehensive Environmental Plan for 2015-2020.

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    Naftogaz is guided adheres to the European environmental law

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    A department on occupational, environmental and industrial safety was established in the company to coordinate environmental, energy and resource saving efforts. In addition, a relevant supervisory board committee was set up. The chairman of the board is at the head of the environmental protection management.

    1Hereinafter referred to as Comprehensive Plan.

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    Read more about Environmental Policy of the company on our web-site: www.naftogaz.com

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    International standards implementation

    The company's enterprises improve their approach to environmental protection and implement an environmental management system in accordance with ISO 14001 as an integral part of the integrated management system of Naftogaz. In 2015, the environmental management system of Ukrtransgaz was certified according to ISO14001. The same system was also introduced at Ukrnafta and Ukrgazvydobuvannya. The Comprehensive Plan stipulates introduction of the ISO 14001 certified environmental system at Ukravtogaz, Ukrtransnafta, Ukrspetstransgaz and other subsidiaries in 2017.

    STAKEHOLDER INVOLVEMENT IN ENVIRONMENTAL ISSUES

    Sticking to the principle of information openness and transparency, Naftogaz welcomes cooperation with all stakeholders concerning environmental and social impact of its business. Naftogaz' "Procedure for interaction with stakeholders" is applied to all activities of the company and projects that have significant impact on environment and communities or arouse stakeholders' interest.

    Naftogaz posted the Environmental Policy on its web-site and publishes annual reports on measures taken by the company to reduce its environmental impact. Subsidiaries of the group regularly report on their environmental indicators and plans to the authorities and statistics departments.

    FUNDING FOR ENVIRONMENTAL PROTECTION

    Every year the enterprises of the group design and fund comprehensive environmental projects aimed at air protection, sustainable use of water resources, mineral resources and soil, and waste management. Naftogaz subsidiaries designated UAH 75.3 million of their operating costs and capital investments for environmental protection in 2015. Another UAH 52.2 million was paid for environmental protection services, along with UAH 30.4 million of the environmental tax.

    ENVIRONMENTAL IMPACT ASSESSMENT, MONITORING AND CONTROL

    Activities of Naftogaz enterprises, namely conventional oil and gas production, transmission and storage, cause significant impact on environment: air, water and soil. With the view to minimize environmental impacts, Naftogaz makes environmental assessment at all stages from project design (planning and feasibility study) to project implementation, as stipulated in the current legislation of Ukraine and the European environmental laws.

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    In 2015, the company's Environmental policy and the Typical provision about the environmental and radiation safety agency was approved, the environmental reporting of the companies was updated and optimized

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    The company focuses on the following environmental impacts related to its activity:

    • exploration, drilling and well completion;

    • environmental security during production and transmission of oil and gas;

    • environmental security when storing and transmitting oil and gas via trunk pipelines;

    • illegal siphoning, which leads to leaks and losses of oil and petroleum products and causes petrochemical pollution, and pipeline damages resulted from military actions.

    To manage environmental risks, the company introduces the effective environmental management system and takes environmental protection measures described further in this report.

    Environmental monitoring and control

    In accordance with the current legislation of Ukraine and company's own regulations, all Naftogaz enterprises control the level of environmental impact and conduct the analysis of environmental safety in the areas of impact of their industrial activity. There is an ongoing monitoring and control of emissions into the atmosphere, quality of sewage, condition of land resources and the control over natural gas emissions. Considering the results of monitoring, the company may adjust, if needed, the planned environmental measures and quickly respond to emergencies.

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    In the first period of application of the Kyoto Protocol (2012), Naftogaz has carried out joint implementation, which has reduced emissions by 20 mln. tons of CO2 eq. These projects facilitated implementation of energy-saving measures and helped to attract investments in the modernization of technological equipment

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    Elimination of natural gas leaks

    One of the most effective ways to reduce natural gas losses is to identify and eliminate gas leaks in valve components as well as in flange and threaded couplings. For this purpose, Naftogaz introduced a leakage monitoring system and provided mobile laboratories of Ukrtransgaz trunk pipeline departments with necessary equipment. All mobile laboratories of Ukrtransgaz are certified by Ukrmetrteststandart in terms of their technical competence and credibility of measurements. Natural gas leaks are identified electronically (with Bacharach Hi-Flow Sampler) and acoustically.

    COMPANY'S CONTRIBUTION TO FIGHTING CLIMATE CHANGE

    Climate change is a focus of environmentalists, scientists and international community. Naftogaz contributes to fighting against climate change through active participation in the Kyoto Protocol projects.

    Cooperation with international financial institutions
    The first period of the Kyoto Protocol expired in 2012. In 2015, at the 21st Conference of the Parties to the UN Framework Convention on Climate Change in Paris a new international agreement on climate issues was signed and new mechanisms for the emission reduction were adopted. Participating countries, including Ukraine, submitted national programs to combat climate change on the planet to compose the text of a global climate agreement. One of the instruments aimed at reduction of greenhouse gas emissions is introduction of the national emissions trading system (ETS) as provided by the Directive 2003/87/EC of the European Parliament and the Council dated 13 October 2003, whereby Ukraine must fully implement measures stipulated in it by 1 January 2017.

    Given the significant number of facilities that are subject to the licensing system for oil and gas companies, Naftogaz is actively involved in various activities, projects and training programs on issues related to the ETS implementation. The company started selecting facilities for the pilot ETS projects.

    Furthermore, the Comprehensive Plan for 2015 — 2020 provides for measures to ensure reduction of greenhouse gas emissions, including optimization of operating practice of the existing fuel-driven equipment and its modernization; detection of valve leaks and their elimination by mobile laboratories using modern equipment and high performance sealants.

    In order to reduce greenhouse gas emissions, several problems inherent to technological gas transmission processes must be solved, namely:

    • large-scale modernization of the trunk pipeline equipment;

    • introduction of new technologies into routine maintenance and repair works in order to save energy and resources and protect the environment.

    More reasonable use of the gas for production and technical needs saved UAH 2.2 billion in 2015. 2.4 bcm of gas were used for production and technical needs in 2014, 1.8 bcm — in 2014, and 1.5 bcm — in 2015.

    Environmental taxes
    Due to regulatory changes actively supported by Naftogaz, households significantly reduced their consumption of gas in 2015. 2 bcm of gas were saved not only as a result of lost territories, changes in temperature or gas consumption rates. This decrease in consumption was an effect of change in consumer behavior, which can be explained primarily by adjustment of prices for households to the market level and replacement of state cross-subsidies for Naftogaz with direct subsidies for low-income citizens. For details see Case study: transition from implicit to direct subsidies.

    AIR PROTECTION

    Naftogaz implemented its Environmental Management Plan for 2015-2020 to prevent air pollution in 2015, including the following measures:

    • repair and replacement of pipeline sections in critical condition;

    • monitoring of corrosion, electrochemical protection and in-line inspection of pipelines;

    • inspection, repair and replacement of safety breather valves of tanks and stations.

    All group's stationary sources of air pollution were inventoried in 2015, and relevant permits for air emissions were received.

    Air emissions from the group's stationary sources totaled about 4.1 million tons in 2015 which is 13% less than in 2014 (excluding carbon dioxide).

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    Naftogaz investment programs include projects on large-scale modernization of fuel driven equipment:
    • use of domestic and imported equipment when replacing gas pumping units along with efficient use of fuel gas and environmental indicators that meet international standards;
    • use of new technologies, including turbo systems and alternative energy sources.

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    According to the statistics, the company's enterprises have been tending to reduce their emissions, including methane, nitrogen compounds, carbon oxide and dioxide, in recent years.

    Naftogaz reduced its emissions in 2015 compared to 2014 thanks to a number of modernization and repair projects, which decreased gas leaks and losses as well as gas consumption for technical needs. Those included the following:

    • introduction of technologies that enable to repair defective sections without emitting gas out of the pipeline;

    • maximum withdrawal of gas from pipeline sections before repairs;

    • construction of waste heat utilization systems;

    • introduction of modern electronic ignition systems at 10 gas internal combustion compressors;

    • construction of a booster compressor station to collect low-pressure petroleum gas;

    • reconstruction of flare systems at the oil and gas gathering facilities;

    • construction of a closed oil processing system;

    • gas recovery, condensate and oil stripping, etc.

     

    RATIONAL USE OF WATER RESOURCES

    Understanding the value of water resources, Naftogaz is trying to rationally use them in its operations. In 2015, the volume of fresh water and drainage of polluted water by the companies totaled 7.02 million cubic meters, which is 7% less than in 2014.

    Total emissions of air pollutants
    The Environmental Management Plan for 2015 — 2020 includes measures for the reduction of pollution discharge with waste waters, including reconstruction and modernization of treatment facilities for domestic wastewater, and construction of oil containment and skimming thresholds at water crossings. In 2015, the group prepared documents to get permits for special water use, designed sanitary protection zones for water intakes, calculated maximum permissible wastewater discharges and developed discharge regulations, controlled quality of wastewater, and prepared passports for water intake facilities. In 2015, the enterprises used water resources within their assigned limits. The company uses water from artesian wells and surface waters. The enterprises dispose wastewater from production facilities to wastewater treatment plants, where they are treated mechanically, chemically and biologically. Quality of wastewater is controlled according to technical guidelines by corporate or contracted laboratories.

    Structure of Naftogaz waste

    WASTE MANAGEMENT

    Enterprises of the company are taking steps to reduce waste generated by their activities and its negative impact on the environment.

    A large share (90%) of waste from the production activity belongs to Hazard Class 4, i.e. the low-risk category. The proportion of Hazard Class 1 waste (extremely dangerous) is less than 0.1%. The most common waste at Naftogaz enterprises is drilling waste such as oil slime, solid and liquid drilling sludge generated mostly at the extraction and oil and gas processing sites. It also includes iron scrap, household and construction waste, waste oils, batteries, tires and daylight bulbs. Oil slime is processed with separation and recycling equipment. Oil slime is treated with recycling technologies or soil rehabilitation is applied on the emergency sites. The companies transfer the rest of their waste of Hazard Classes 1-3 to specialized enterprises for recycling on a contract basis.

    The company's enterprises prepared a special Waste Management Program for 2016 — 2020, which provides for waste management plans and participation in the development of a mechanism for full cost recovery under the "polluter pays" principle and the extended producer"s responsibility (in accordance with the requirements of the European Directives 2008/98/EC, 2006/21/EC). In May 2015, Naftogaz began to work with the State Academy of Postgraduate Education and the Ministry of Environment of Ukraine in the area of decontamination technologies for oil-well tubing contaminated by natural radiation sources. The cooperation should result in a modern and safe technology for cleaning/decontamination of tubing and safe waste management during the process. The technology should be duly approved by the State Nuclear Regulatory Inspectorate of Ukraine and the Ministry of Health of Ukraine.

    Emissions of methane, carbon, non-methane

    REDUCING THE IMPACT ON MINERAL RESOURCES AND SOIL

    Water consumption by Naftogaz enterprises in 2014-2015

    Exploration, construction and operation of wells, pipelines and other production facilities may cause mechanical damage and contamination of soil.

     

    In order to protect soil, the company's Environmental Management Plan for 2015–2020 provides for oil spill response measures, including the use of sorbents closure and reclamation of oil-storage pits. In order to quickly respond to oil spill emergencies, Ukrnafta, Ukrgazvydobuvannya and Ukrtransnafta every year replenish their emergency reserves of relevant chemicals and materials. Localization and remediation in oil-contaminated areas are performed in compliance with the existing regulations. In order to reduce the environmental impact, it is planned to introduce modern drilling and extraction technologies, optimize operating practices and repair the existing equipment in time.

     

    ENVIRONMENTAL LITERACY

    The company develops environmental literacy among its personnel, as well as the Ukrainian society. This is the foundation for a responsible attitude to the environment and reasonable use of natural resources. In 2015, the company introduced the concept of the Green Office and developed its own Green Rules of Conduct for Employees at Work and at Home. In the group's premises there are posters reminding of the need to save resources (to switch off lights and air conditioning when leaving workplace, to save water), print in draft mode and so on. Among the Green Rules there are off-the-job recommendations: install home appliances and devices with resource-saving properties, choose environment-friendly means of transport, and buy food in glass and paper containers as well as many other tips. More than 50 employees of 22 enterprises were trained in Green Rules of Conduct.

     

    Each year, employees of the company's enterprises participate in landscaping of production sites and surrounding areas in their cities and join the annual nationwide event called "Pursuing clean environment".

    Plans for 2016

     

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