Novatek, Russian Steelworks Ink Decarbonisation Pact

Russian gas producer Novatek has signed a memorandum with Russian steelworks NLMK Group on co-operating to reduce greenhouse gas emissions, Novatek said in a stock filing on January 12.

NLMK is one of Novatek's largest industrial gas customers. Under the agreement, the pair will work together in the areas of carbon capture, use and storage, hydrogen production and use and in the development of new products for low-carbon technologies.

"Expanding our joint activities with our customers and suppliers in reducing our carbon footprint is of strategic importance to us," Novatek chairman Leonid Mikhelson said. "We are undertaking further work to develop low-carbon technologies in Russia to reduce greenhouse gas emissions and contribute to achieving the global emission goals as outlined in the Paris Climate Agreement."

Novatek, which is also Russia's biggest LNG exporter, has been looking to convince increasingly climate-conscious investors of its green credentials. The company approved new 2030 climate goals in August last year and has announced various new projects recently to tackle its emissions. In December it formed a pact with Germany's Siemens on producing hydrogen and using it for power generation in the Russian Arctic.

These efforts have not gone unnoticed. Novatek's environmental, social and governance (ESG) score was upgraded last year by US financial firm MSCI from BBB to A, making it the highest-scoring Russian company. In contrast, its Russian counterparts Gazprom and Lukoil still have BBB ratings, while Rosneft is rated BB.

"It is unclear what the trigger for the upgrade was, but we know Novatek has been working diligently to improve its ESG score, as have, for that matter, other Russian oil and gas companies such as Rosneft, Lukoil and Gazprom," Moscow brokerage BCS Global Markets said in a research note in December. "As a gas company with peer-leading reporting practices, Novatek was already likely to screen well with portfolio managers, which we understand are increasingly under pressure from their own clients to show they are investing with ESG scores in mind. Receiving this upgrade should only confirm its attractiveness on these measures."