Russia


European Union has been working on the economy to become carbon-neutral until 2050. Russia is seeking to reduce emissions and diversify the energy exports. For bilateral cooperation, the “Green Deal” may be a challenge on the first glance, but these could turn into opportunities, said Florian Willershausen, BD Director of Creon Capital at the 9th seminar on the future of Russia-EU relations at November 2, organized by the Russian International Affairs Council, Delegation of the European Union to Russia and the Embassy of Germany.

Florian Willershausen, Director BD Creon Capital

Florian Willershausen
Florian Willershausen

In the EU some tend to think quietly that Russia lacks behind in terms of climate change mitigation, recent accidents such as the Norilsk oil spill may give even some evidence. But this perception is incorrect: Together with WWF Russia Creon Capital and Creon Group have been conducting a rating of oil and gas companies in terms of environmental transparency for seven years. This project shows a more and more open discussion of challenges, and the instruction of elaborated ecological policies to reduce the carbon-footprint.

At the same time, in Russia many experts sometimes tend to talk down the “Green Deal”, stating that there will always maintain a market for Russian oil and especially gas, since both resources are cheaper than elsewhere and available on the long run. But this argument is at least risky. EU countries are willing to subsidize the energy transition, so that higher energy costs are sufferable for private and corporate customers.

There are many challenges both sides must face.

Challenges for Russia

For Russia, of course, gas will remain an important export good to Europe in the next decades. But Europe already started significant investments in a hydrogen infrastructure to reduce fossils. Big oil and gas companies are now turning from fossil fuel merchants to green energy suppliers of tomorrow. For example, Shell has been replacing a gas-based steam reformer by a renewables-based electrolysis to produce carbon-free hydrogen for their Rhineland refinery in Germany – with the result of a drop in gas demand.

Some may say, that power generation on gas causes less emissions, than coal-based power generation, that is still durable in Germany. And that since coal remains strong for domestic and social political purposes, gas will stay forever. But there is no guarantee that electricity still will be produced from the fossils, once the coal power plants are shut down in near future of 2030s. This is a trend concerning not only Europe, but the whole world. The Israeli regulators are about to block the construction of a modern and a highly-efficient gas power plant by Siemens Energy. The Israel government switched to support only energy projects from renewables.

The energy landscape is changing dramatically and very fast.

Russia cannot foresee the regulatory sticks to come, for example taxes on pollution or custom duties for carbon-intense products. But Russian enterprises should be prepared that the future of the fossils is in jeopardy.

Challenges for the European Union

And there are also tough challenges from the “Green Deal”the European Union has to face.

It is naïve to think that all energy demands can be covered from renewables at the current stage. Or that all hydrogen to being imported to Europe must be “green”. With all respect to the “Green Deal” and the growing share of renewables in the energy mix, there will not be enough renewable-based hydrogen available in Europe. It is unfeasible, when the entire passenger car sectors will shift to electricity, while coal and nuclear power plants in Germany are being shut down. But instead of hoping to increase their gas supplies to the EU, Russia might promote carbon-neutral hydrogen through a jointly developed infrastructure.

This situation offers a perfect framework for synergy effects.

Framework for synergies between Russia and the European Union

Apart from the challenges, there is motivation by the financial sector to bring incentives in terms of cheap financing for green projects. The investors demand money to be spent in green projects, which gain cheap funding. EU green bond market is open for Russian projects despite sanctions.

European companies provide plenty of high-end solutions in the fields of energy efficiency, waste treatment and ecological monitoring, which are highly demanded in Russia right now. These solutions must be adapted and localized to the Russian context.

Russia can keep its role as major energy supplier. The country exported in 2019 more than 150 billion qm³ of gas to the EU, yet a very important an irreplaceable market for Russian gas producers. The “greener” the economy becomes, the more will the gas demand decline. So Russia must prepare itself to produce carbon-neutral hydrogen based on natural gas and LNG.

At the same time, Russian business should be ready to shape supply chains for clean energy proactively. This approach works very well, as can already be witnessed in Germany. The Russian LNG producer Novatek invests in a small-scale LNG terminal in Rostock, from which in short run the fuel will be provided to ships and trucks further downstream. For the next 20 years, LNG is the better alternative to diesel and heavy oil, not yet hydrogen.

The governments in both countries should encourage and support such projects also for synthetic polymers, as well as for the hydrogen infrastructure. Both Russia and European countries need to start joint research and development programs to produce blue or turquoise hydrogen, and not only green hydrogen, where the entire European discussion on hydrogen turns around.

Both Russia and Europe share the vision of a long-term climate neutrality, aiming to reduce harming climate emissions and to develop new value chains in green energy. This requires financial support also from governments and development banks. In this context it would be helpful to lift financial sanctions on Russia at least by a degree development banks are allowed to cooperate with Russia and finance joint “green” projects.

Last but not least, the energy cooperation can enhance the political ties between EU and Russia.

Recently, Germany declared an energy partnership with Ukraine with focus on hydrogen. Further partnerships between EU members and other countries are being set up. An EU-Russia Dialogue on green economy and clean energy is urgently needed. And the business demands a bilateral hydrogen partnership driven from the top official level. This kind of cooperation would be very fruitful and beneficial for both sides to fulfill decarbonization goals until 2050.

 



The coronavirus pandemic has dramatically changed the global economy. And investors are “risk on” again. In addition to the pandemic currently sweeping the world the climate crisis remains in the background and investors are increasingly worried about environmental risks. Russian companies, in particular, are worried about being penalised for environment related issues and will have follow the Green Economy trend that is being demanded by retail investors, first and foremost.

The coronavirus pandemic has distracted from the furore created by Swedish climate crisis campaigner Greta Thunberg and her “Friday’s for the Future” youth movement. Nobody seems to care anymore about climate change since the globalization has stalled. People fear losing their jobs more than what the future holds — even on Fridays.

But appearances are deceptive. While governments around the world are busy curbing the pandemic and managing economic loses, a sophisticated green financing infrastructure is being built in the background. Companies, especially in Europe, which has embraced Thunberg’s call to action, taking their ESG (Environment – Social – Governance) responsibilities seriously and including it in their long-term strategies. This trend will not stop, and can be expected to grow in importance.

The pandemic has sharpened the senses to risks among companies’ decision-makers. Coronavirus has clearly demonstrated the fatal consequences of underestimating the risks for supply chains and the disruptive power Mother Nature still commands.

Banks, investors, and regulators re-evaluate risks that go beyond the pandemic. A World Economic Forum (WEF) report on global risks has linked nine out of ten risks directly to ESG factors, the most important of which are the protection of the climate and the environment. Financial players have started to closely monitor companies’ ESG policies.

While the world is fighting the coronavirus, Europe continues its efforts to build up a large-scale financial infrastructure for ESG investors. In 2016, the Luxembourg Exchange launched the Green Stock Exchange (LGX) – a trading platform for securities and Eurobonds of projects that meet 17 UN sustainable development goals (SDGs). Today it is the global leader in the “green bond” market, whose volume doubled to €216bn in 2019. Today less than one per cent of all traded bonds are green, but this market has enormous growth potential.

Investments revaluation

Large investors have already given an impulse to “greenify” the market, and the rest of the investing community is expected to follow. Last summer, the world’s largest investment company Blackrock banned all investments into the traditional energy sector. In October, the Norwegian pension fund Global sold its stake in Russia’s metallurgical titan Norilsk Nickel for environmental reasons: according to the Norwegian Ministry of Finance, the environment is suffering because of the company’s activities, and this violates the fund’s code of ethics (although Global itself made €900bn  from oil sales the same year). And Brussels has already banned the European Investment Bank (EIB) and the European Investment Fund (EIF) from investing in oil, gas, and coal industries.

A this trend progresses more and more investors are expected to redistribute funds from fossil fuel producers to green-tech companies. Raising capital in equity markets for green and eco-friendly companies will become easier. Financial institutions will monitor ESG-compliance and make access to credit lines and bank accounts easier. In the case of non-compliance with these standards, credit and capital will become hard to get.

Classical energy companies will be subjected to the neoclassical risks. Why invest in bonds, even a super-profitable oil company, if it is exposed to non-ESG compliance risks or public scandal that could ruin an investment overnight? Neither investors, nor banks, nor regulators are willing to bear responsibility for serious environmental consequences.

Russia has no choice but to follow the trend

“The trend if your friend,” runs the old market adage, but in this case it is a trend with a twist. Falling oil prices have already created problems for the low-liquid waste market, which is still at very early stage of development.

The upshot of the low prices is petroleum raw materials to make plastics is now cheaper than recycled plastic waste. But the large petrochemical producers such as Russia’s Sibur and Nizhnekamskneftekhim remain committed to using recycled plastic in production, thanks to pressure from their strategic partners, customers, investors, and banks as well as their own ESG-compliance rules.

Many Russian companies are actively introducing ESG compliance strategies and officers. For an example, Russia’s major privately owned Lukoil oil producer covers 6% of its electricity needed using renewable sources – primarily solar energy. Shell plans to spend €2bn a year on development of alternative energy sources, and the Norwegian oil major Equinor will invest one fifth of its investment budget in renewables.

Russian petroleum companies are still far from these numbers, though they are already active in environmental protection initiatives. Environmental performance of oil and gas companies is monitored by Transparency Rating of Environmental Responsibility, which has been jointly conducted by Creon Group and WWF Russia (World Wild Fund for Nature Conservation) for seven years already.

The time for large investments into the green economy has come. Now is the time to develop clean renewable energy, reduce burning of associated gas to zero, and increase the share of recycling in the polymer industry. In the new economic order only businesses with a consistent strategy for sustainable development in the social and environmental arena can be profitable. This need has already recognized by many, not just Greta Thunberg.

 


Florian Willershausen, director of Creon Capital, managing Luxembourg-based fund’s company Creon Energy Fund, which invests in projects of green technologies, renewable energy and logistics projects. The fund is the core part of Creon Group, a strategic consultant in the transition to sustainable development and integration of ESG factors.


 

This text has been published on Intellinews:

https://www.intellinews.com/opinion-why-the-russian-economy-will-inevitably-become-green-after-the-covid-19-epidemic-is-over-183464/?source=russia

A Russian version is available on the leading Russian online portal RBC:

https://trends.rbc.ru/trends/green/5ea82ca89a79472db412c14a?from=center



As in the previous year, Sakhalin Energy ranked first in the Environmental Transparency Rating of Russian Oil and Gas Companies. The international producer of liquefied natural gas (LNG), owned by Gazprom, Shell, Mitsubishi and Mitsui outperformed in terms of openness on environmental topics, a clear strategy on environmental responsibility and with concrete measures to decrease the production’s impact on the environment. On the second and third ranks followed Zarubezhneft and Exxon Neftegas Ltd., which also confirmed their leading positions of the previous year.

The rating was conducted for the sixth time already. From the very beginning, CREON Group supported the project as a strategic partner, whereas WWF (Russia) takes responsibility for the methodology and the National Rating Agency carries out the calculation based on publicly available sources. In 2019, the project was part of the EU funded People for Nature project. The government of the Russian Federation supported the event as well: The presentation took place in the government’s Analytical Center in Moscow. This time, 20 oil and gas companies were subject of the rating.

In addition, five companies received diplomas in additional categories: Lukoil was granted for its top performance in terms of environmental transparency, Rosneft was honored for encouraging the most constructive dialogue regarding accidents and controversial situations. For its leadership in mitigating environmental impacts Surgutneftegaz received a diploma, whereas Gazprom Neft was granted for its most dynamic growth of oil recovery. Tatneft has shown the most rapid advancement in the rating, which led to a diploma as well.

CREON Group chairman Dr. Fares Kilzie reminded: “We launched this project in 2013, which turned out to be revolutionary for the industry. The concept we are promoting is a forerunner not only in Russia, but globally. It is hard to acknowledge, but the results of our activity will not be visible today or tomorrow. At present, we are witnessing the changes in the Russian oil & gas business, and the massive efforts of the government and the companies are evident now, alongside a significant and inevitable transformation towards sustainable development. And we as a Group are proud of being part of the process.”

Aleksey Knizhnikov of WWF Russia confirms a significant increase of the companies transparency: “The modern economy is rapidly transforming and today investors and consumers value both the economic component of transactions and the social and environmental responsibility of businesses, which is important for gaining a competitive edge,” points out the WWF Russia Head of the Program for the Business Environmental Responsibility. “For the sixth year in a row, we have seen increasing progress in the companies’ disclosure of environmental performance. According to our estimates, public nonfinancial reporting of oil and gas companies has showed the fastest development in Russia over the last  years and is becoming the basis for dialog with stakeholders on reducing environmental impacts,” he says.

The robustness of the method and the accuracy of calculations were confirmed by the FBK Grant Thornton audit and consulting group. The company performed selective tests of the criteria and analyzed the accuracy of the scores (levels) against the method, returning a favorable opinion. Vladimir Skobarev, Partner and Head of Corporate Governance and Sustainability at FBK Grant Thornton underlined: “The role of sustainability ratings as important tools for external assessment of corporate social responsibility is increasing every year, while the practice of independent confirmation of the ratings themselves, in turn, is a tool to increase trust in them.”

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About:

The Rating of Environmental Responsibility in the Russian Energy Sector has been launched in 2014 as an initiative of the CREON Group and WWF Russia. The project’s objectives were to conduct tangible and comparable information on environmental activities of oil and gas companies. Thanks to the publicity effect of the rating, some influence could be exerted on the companies in Russia, which partly increased transparency, decreased pollutions or developed an environmental risk-management-system. In 2017, the rating was first presented in Europe, also a separate rating of the Kazakh oil and gas companies was conducted.

The World Wide Fund for Nature (WWF) Russia works with state institutions, companies, experts and local communities to change people’s attitude to nature. The priorities of WWF’s various activities in Russia include the protection and preservation of biodiversity, sustainable forestry and fisheries, the «green economy», environmental governance, climate and energy.

CREON Capital is a fund management company based in Luxembourg. It manages the CREON Energy Fund, which actively invests in energy projects. Green technologies, renewable energy and logistics are among the focus areas of investments. The private equity fund also invests in the processing of gas and the construction of a liquefied natural gas infrastructure.

 

You may DOWNLOAD the rating brochure HERE:

 

For further information please contact:

Maria Dymenko, md@communicationz.ru, +7-985-135-1009

 

Pictures:

Creon Group chairman Fares Kilzie congratulated representatives of Russian oil and gas companies with outstanding results in terms of environmental protection and transparency.

 

Sakhalin Energy ranked first in the rating. The company’s director for environmental protection Andrey Samatov (right) received the diploma from Creon Group chairman Fares Kilzie.

 

The rating on “Environmental Transparency of Russian Oil and Gas Companies” has been conducted for the sixth time in joint cooperation between Creon Capital partner Creon Group and WWF Russia. It aims to push the energy companies forward in order to increase measures on environmental protection, which is increasingly happening.


Like it or not, coal will remain an important resource for generating energy and heat over the coming decades. Countries such as China, Russia, Kazakhstan and even the EU member state Poland are increasing their coal production. It is therefore even more important to minimize environmental and health risks associated with coal. This is the mission of CoalTech Limited.

Clean Invest Africa Plc (NEX:CIA) and fund management company Creon Capital are pleased to announce the launch of CoalTech S.a.r.l. The joint company aims to expand towards Russia and CIS markets with innovation by CoalTech Limited. Recently acquired by the clean technology and renewable energy investment company CIA, CoalTech has developed an innovative agglomeration solution that converts coal fines waste deposits into combustible coal pellets via a proprietary technology.

CoalTech innovative solutions are required in Russia and CIS countries, which account for roughly two thirds of the coal production in Eurasia, excluding China. Creon Capital invests in the joint project with its clean-tech focused Creon Energy Fund (Sicav-SIF), aiming to develop multiple projects and scale up production in these markets. The Fund’s initiator Creon Energy (Moscow) will be responsible for the project implementation regionally, while adding value through its vast network in the region’s energy sector.

The technology used for upcoming projects is unique: With the help of patented binders, coal fine waste is being dried and processed into pellets, which show the same calorific values, composition and other characteristics as the coal of the respective mine itself.

CoalTech CEO Filippo Fantechi explains: “Our technology produces a valuable product made out of polluting and toxic waste. Tested successfully initially in South Africa, we are now ready to upscale globally. Russia and the CIS countries are attractive markets from an environmental and health perspective, as well as having an enormous industrial legacy. People in the region suffer from poor water and air quality, as residues of coal production and processing are often released into the environment. Drinking water is often contaminated by coal fine leaching. In winter times, carbon particles from coal fines in the air sometimes create what is known as ‘black snow’. These coal fines could relatively easily be cleaned-up and processed into combustible pellets with CoalTech’s green technology. We look forward to working with Creon to maximize this commercial clean–up opportunity”.

Dr. Fares Kilzie, Chairman and CEO of the Fund managing company Creon Capital, is confident that the new technology will be demanded in the region: “People in Russia and other former soviet countries care increasingly about how companies treat the environment, especially when phenomena such as ‘black snow’ highlight the problem of pollution. Companies have to take this into account, the industry and government authorities are seeking solutions, and the CoalTech green technology provides a commercially attractive solution whilst enabling the industry to effectively improve its environmental and social impacts.”

Creon Capital chairman Dr. Fares Kilzie and Shaikh Mohamed Abdulla Al Khalifa, main shareholder of Clean Invest Africa, signed the shareholder agreement in Forte dei Marmi (Italy). CoalTech S.a.r.l. has been established in Luxembourg, further updates shall be provided as the Russia and CIS opportunities develop.

UPDATE: CoalTech S.à.r.l. has been incorporated on October 4th, 2019.

 

You can DOWNLOAD the press-release here (EN/RU).

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ABOUT US

Creon Capital S.a.r.l. manages the Luxembourg-based Creon Energy Fund (S.C.A. Sicav-SIF). The regulated Alternative Investment Fund (AIF) concentrates investments up to 100 Mio. Euro (targeted) on green technologies, logistics projects, value-adding midstream and downstream energy projects. The unlimited opportunity fund cooperates with partners such as the Investment Corporation of Dubai (ICD) and is focused on emerging markets and uprising new business segments in Eurasia and the Middle East. The Fund’s initiator and general partner is the Moscow-based independent consulting and management company Creon Energy, which brings add value on projects in Russia and CIS countries by using its vast network and market expertise in the region.

CoalTech Limited is registered in the UK and its parent company, Clean Invest Africa Plc is listed in London NEX Exchange (NEX:CIA). CoalTech has developed a revolutionary and innovative agglomeration solution that converts coal waste into combustible coal pellets via a proprietary technology using a specially formulated organic binder and a customized production process. CoalTech has developed its proprietary technology over almost a decade, has an operational producing and testing plant in Witbank, Province of Mpumalanga, South Africa. This plant started commercial operations in November 2018. The plant is expected to operate at full capacity soon, generating revenues on target margins based on a net monthly volume of 5,000 tons.

Creon Capital chairman Dr. Fares Kilzie (on the left) and Shaikh Mohamed Abdulla Al Khalifa, main shareholder of Clean Invest Afrika Plc. signed the shareholder agreement, based on which the Luxembourg-based Joint Venture CoalTech S.a.r.l. will be established.

 

 

 

 

 

 

 

 

 

 

 

 

 

The team of CoalTech Ltd, Creon Capital and Creon Energy after the signing ceremony (from the left): Yuri Ratnikov and Vladimir Voloshin (Creon Energy), Abdulla M. A. Al Khalifa (CoalTech Ltd.), Dr. Fares Kilzie (Creon Capital), Shaikh Mohamed Abdulla Al Khalifa (Clean Invest Africa), Sandjar Turgunov (Creon Group), Florian Willershausen (Creon Capital).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Press Contact:

Maria Dymenko,
Creon Group
Head of Corporate Communications
E-Mail: md@creon-group.com
Phone: +7-985-1351009



Relations between Moscow and the EU have hit their lowest level in decades. But feedstock industry expert Fares Kilzie says the bloc’s current energy diversification attempts will not leave Russian firms stranded.

There’s hardly anyone who knows more about the German petrochemical industry’s enormous need for resources than Russian entrepreneur Fares Kilzie. In the early 1990s, he was based in Germany helping companies such as Bayer and Süd-Chemie secure petrochemicals from Russia.

After 2001, Kilzie went back to Russia and eventually founded the Creon consultancy helping European companies understand the Russian energy market. 2016 saw the establishment of the Creon Energy Fund in Luxembourg, which provides guidance for investing safely in Russia.

DW met up with Fares Kilzie in Berlin to talk about the future of Russian energy supplies to Germany and the European Union as a whole.

DW: Talking about EU-Russian business relations these days, also in the energy and feedstocks sectors, is a bit like walking through a minefield, following Russia’s falling out of grace with the West over its perceived role in the Ukraine conflict, would you agree?

Fares Kilzie: In my business life, relations between Russia and the EU have never been worse than they are today. But I have to add that we experience this bad state of relations mainly in Brussels, and we don’t see it in Berlin. Russia and Germany are still having a very constructive dialogue even while relations between Russia and the EU in general are in a bad state. Dialogue between Moscow and Berlin is strong, despite heated arguments being exchanged sometimes.

Russia has been a very reliable supplier of hydrocarbons for Germany all along, concerning both natural gas and oil. As for oil, Rosneft has been one of the major oil suppliers in Germany, and Gazprom the main provider of gas — maybe Novatek will become a third important player with LNG [liquefied natural gas].

I gather from your answer that you don’t believe the good times for Russian oil and gas suppliers to the EU are coming to an end. But don’t increased attempts in Berlin and Brussels to diversify supplies and thus reduce dependence on Russian sources tell a different tale, especially when it comes to natural gas deliveries?

When it comes to debates about reducing the amount of pipeline gas coming to Germany from Russia, I was one of those who expected that to happen even before the crisis in relations with the West started. I was in contact with German feedstock buyers, and they were telling me as early as the 1990s that they would have to diversify their supplies. So I know this approach very well. I believe it’s a good one, because risks have to be spread when it comes to feedstocks.

Many analysts insist Germany — and other recipients in the EU — could have easily done without the controversial Nord Stream 2 gas pipeline. What’s your take on this?

Touching on the current Nord Stream 2 controversy, Russia in this project is only assuming the role of a technical partner, meaning it lays the 1,200 kilometers of the pipeline to Germany and supplies the gas, but any decisions beyond that have to come from Germany. In my eyes, the project is very important for the chemical industry in Germany. Parts of the industry are already migrating from Germany as there are at times not enough feedstocks for the industry. In order to create new products and jobs, you also need large amounts of gas at a reliable price — and you need it now, not in five or 10 years. Russia is offering this opportunity of getting more by 2020.

But isn’t it rather risky for public joint stock company Gazprom to keep focusing almost exclusively on its pipeline business?

In Russia, I’ve been know as a critic of Gazprom for exactly that. Many see Gazprom as the holy cow of Russia, generating a big share of the country’s income, so that seems to make it untouchable. There have been a lot of changes in Gazprom’s management structure over the past two months and there’s more to come. We’ve always said in the Russian media that Gazprom is inefficient, not using the latest technology and moving very slowly toward the gas refining business.

I never shy away from the fact that this sort of miscalculation could lead to trouble in the future. Only time will show how it will fare by focusing only on its pipeline business and not expanding its activities to LNG. But we’ll only have an answer to this in five or six years from now. My personal opinion is that they made the wrong decision also by trying to convince the Russian president that the shale gas story in the US would be ending soon — it’s not ending. On the contrary, it’s taking geopolitics to another level.

In the second quarter we expect to have equilibrium between the price for pipeline gas and that for liquefied natural gas, which is very good for the market.

According to the European Commission, the EU’s gas demand is around 480 billion cubic meters and is projected to remain stable in the coming few years before going down as a result of the bloc’s climate protection policies and the increased use of renewables. So, aren’t today’s investments in gas deliveries shortsighted anyway?

Let’s face it, gas is one of the most environmentally friendly products that we have at the moment, with relatively low CO2 emissions. It’s very easy to handle. We’ll see a lot more electrical cars in the future; we’ll see more wind farms and solar energy facilities. Right now, though, the German feedstock problem is that neither wind nor solar can replace the physical hydrocarbon to produce ethylene for example.

As soon as there are reliable pipeline supplies, the chemical industry will start investing. BASF (Wintershall/DEA) and others are trying to secure the feedstocks as soon as possible so as not to lose out in the competition with Asian or even US producers. Several million jobs are affected, directly or indirectly, as we’re talking about construction chemicals, paint chemicals, chemicals for the auto industry and so on. Half of any ordinary car is made of petrochemical components (polycarbonate, polyethylene etc.), so you have a wide range of products that are needed here.

Private Russian energy company Novatek is looking to establish a foothold in Europe including Germany where it aims to open a regasification facility in Rostock by 2022 – and this against the background of the German government having promised the US administration it would build two LNG terminals of its own to also receive American gas …

Novatek is also looking at the Spanish market, the Italian and Moroccan markets, and it’s looking to build regasification facilities in order to supply gas to customers, who have no access to pipeline gas. Rostock, with its long-term trade ties with St. Petersburg, can play a major role for the German economy. It’s a gateway to Germany. To have a regasification facility there, coupled with reliable gas supplies from Novatek to serve the German market is a nonpolitical thing. It’s only a small-scale regasification unit.

The Novatek activities in Germany can’t really be seen as a threat to any other LNG supplier because of the low volumes to be involved.

For 25 years, Fares Kilzie has been helping European companies doing or wanting to do business in Russia. He’s the founder of Creon Group, an independent investment and management association focusing on the energy and chemical industries in Russia and the Commonwealth of Independent States (CIS). The Creon Energy Fund invests in Russia together with European technology partners.

The interview was conducted by Hardy Graupner.

Link: https://www.dw.com/en/expert-russia-to-remain-crucial-feedstock-supplier-despite-spat-with-brussels/a-48213356



Former EU Commission President Romano Prodi is firmly committed to strengthening relations between the European and the Eurasian Union. As “political relations are currently stagnating”, Prodi said, the economic integration of those two regions must be improved even more. The EU politician, who also served as Prime Minister of Italy before and after his term as Commission Chief (1999-2004), is seeking to bring together the network of economic areas between the Atlantic and the Pacific.

The “First Connecting Eurasia Dialogue” should be established as a platform to connect businesspeople from Europe and Eurasia. The event took place on 15 March in Brussels, Creon Capital supports this dialogue as a main sponsor. More than 200 guests from Eurasian and European Union countries accepted the invitation to the Cercle Royal Gaulois in Brussels.

Creon Capital Chairman Fares Kilzie emphasized: “The Eurasian Economic Union is not a political initiative, and this should be demonstrated on this event to decision-makers in Brussels.” Too often, the region was reduced to political conflicts between the EU and Russia. “This politicization is a mistake”, says Kilzie: “Eurasia is a big market for European companies and vice versa. Economic relations in both directions must be promoted by politicians instead of being disturbed.”

The participants and panelists from Eurasia outnumbered the number of EU representatives. Kilzie criticized this: “This is more of a monologue, as representatives from Eurasia are much stronger represented in Brussels.” Similarly argued Mark Gyetvay, vice-president of Russian LNG manufacturer Novatek: “We need to work together and move from business to business to business.”

Both the Fund’s initiator Creon Group and the managing company Creon Capital support several initiatives to strengthen trade between East and West. Only two weeks ago, the Luxembourg fund management company joined a German initiative promoting free trade between Vladivostok and Lisbon. Russia’s minister of economy Maksim Oreshkin attended the signing ceremony during a Russian-German conference on bilateral economic relations.

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Participants of a panel discussion on business in Eurasia (from the right): Pierroberto Folgiero(CEO Maire Tecnimont), Fares Kilzie (Chairman Creon Capital), Mark A. Gyetvay (Deputy Chairman of the Novatek Management Board), Sergey Ivanov (CEO Alrosa), Koen Berden(Executive Director for International Affairs, European Federation of Pharmaceutical Industries and Associations), moderator Philippe Pégorier(President Alstom Russia, Member of the Board, Association of European Businesses).
Participants of a panel discussion on business in Eurasia (from the right): Pierroberto Folgiero(CEO Maire Tecnimont), Fares Kilzie (Chairman Creon Capital), Mark A. Gyetvay (Deputy Chairman of the Novatek Management Board), Sergey Ivanov (CEO Alrosa), Koen Berden(Executive Director for International Affairs, European Federation of Pharmaceutical Industries and Associations), moderator Philippe Pégorier(President Alstom Russia, Member of the Board, Association of European Businesses).


The Worldwide Fund for Nature (WWF) and CREON Group have announced results of the fifth Environmental Transparency Rating of Oil & Gas Companies operating in Russia. The announcement ceremony took place at the Analytical Center of the Government of the Russian Federation in Moscow on the 30th of November.

The Rating project has been implemented with support from the United Nations Environment Program and with participation of the Ministry of Natural Resources and Environment of Russia and the Ministry of Energy of Russia. Just as in previous years, the rating process has been executed by National Rating Agency, while the Luxembourg-based fund management company Creon Capital participated as a partner in the project.

The results of the rating in 2018 both affirmed yesteryear leaders’ standings and revealed new prominent up-and-coming participants. As in the previous year Sakhalin Energy (Sakhalin-2), a joint venture of Gazprom, Shell, Mitsui and Mitsubishi, ranked first, followed by Zarubezhneft. The latter company appears in the top 3 for the first time. Exxon NL achieved the third rank.

For the first time, special diplomas were awarded to winners in each of three Rating categories: Surgutneftegaz and Zarubezhneft shared the first rank in terms of ‘Environmental Management’; Caspian Pipeline Consortium (CPC) scored the best result in ‘Environmental Impact’; and LUKoil convinced the rating agency regarding their ‘Information Disclosure’.

The high importance of the study was underlined by Denis Khramov, the Minister of Natural Resources and Environment of the Russian Federation: “The public initiatives of the Worldwide Fund for Nature such as the Transparency Rating of Environmental Responsibility of Oil & Gas Companies operating in Russia represent an important input in improving ecological policies in the industry, and are also increasing the public availability of environmentally significant information”.

“Recently we have witnessed increasing support and attention to our rating from relevant government bodies such as the Ministry of Natural Resources and Environment of Russia and the Ministry of Energy of Russia, which confirms the importance of ratings in the system of public administration of environmental risks and impacts”, said Alexey Knizhnikov, Oil & Gas Program Leader, WWF Russia. “At the same time, it should be noted that two of four Russian state oil and gas companies, namely NK Rosneft and Zarubezhneft, have been increasingly involved in the rating’s development compared to previous years. Their representatives have always been participating in methodology development and progress review meetings”.

Pavel Sorokin, Deputy Minister of Energy of the Russian Federation, also addressed his support to the rating’s initiators: “Improving social and environmental responsibility of companies in the oil and gas sector in Russia is becoming an increasingly pivotal task in the field of public administration and in achieving better competitiveness of Russian business. The non-government initiative to conduct the rating has proven its effectiveness within the five years since the project started. The dialogue between oil and gas companies and the society on environmental safety issues should be actively pursued with this project”.

Head of CREON Group und Chairman of Creon Capital, Fares Kilzie, underlined in his speech: “CREON Group in general, and Creon Capital in particular, fully support and promote the idea of “responsible investments”, which promotes the rapidly improving investment climate in Russia. As an investment fund we identify outstanding business opportunities, when Russian oil and gas companies improve their ecological footprint. We are ready to contribute in financing sound projects such as advanced APG processing and LNG as an alternative energy source to replace traditional sources fuels such as Diesel and heavy oil. In this context, I would like to mention NOVATEK as a successful endeavor, that grow to the largest Russian LNG producer. This company pioneers with the implementation of large-scale LNG, which may change the whole industry’s structure.

DOWNLOAD the rating brochure (in English). 

Picture: Representatives of the top-3-ranked companies Sakhalin Energy, Zarubeshneft and Exxon (front row), accompanied by the rating team and the winners of three sub-categories – Surgutneftegas, KTK and Lukoil.

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ABOUT THE RATING

The “Environmental Transparency Rating of Oil and Gas Companies” operating in Russia is an independent project, invented by the Fund’s initiator Creon Energy in 2014. More than 30 Russian and international enterprises are being rated annually regarding their environmental policy. The rating is conducted independently by the Russian Rating Agency, according to a sophisticated methodology developed by the Worldwide Fund for Nature (WWF) Russia. In 2018, Creon and WWF also started to rate oil and gas companies in Kazakhstan, a global rating will be conducted soon.

Learn more about the ratings history (external link)

OBJECTIVES

For a long time the mostly state-owned oil and gas companies in Russia were closed shops. Reports on environmental sustainability – missing. Manuals how to deal with hazardous situations – out of date. Recultivation projects for oil spills – what for?

In the past couple of years the situation has changed tremendously: Even large state enterprises such as Rosneft started to report on environmental responsibility in detail. Lukoil installed solar-based power generation on their oil production plants. And the gas associated with the process of oil refining has increasingly been processed or transferred to pipeline systems instead of being burnt.

The rating aims to accompany this process towards more environmental responsibility. The disclosure of information has significantly increased within the five years the rating has been conducted. Companies’ ecologists discuss the ratings results and best-practice examples. The product’s presentation annually turns out to be a gathering of specialists working for competing companies in Russia. But all of them try hard to get the oil and gas production “greener”. In 2018 the rating’s results have been presented in the Analytical Center of the Russian government, representatives of several ministries attended the event.

Learn more about the rating’s objectives (external link)

METHDOLOGY

The methodology behind the rating of oil and gas companies in terms of environmental transparency and responsibility has been developed in 2014 and reviewed since then on an annual basis. Every year all Russian oil and gas companies are invited to participate in a round table discussion with WWF specialists to discuss the details and propose changes. Large companies such as Rosneft and Lukoil contribute to this discussion constructively just as much as smaller producers such as Salym Petroleum.

According to the metholodology the rating agency assesses the oil and gas companies along the value chain from hydrocarbon production, processing to transportation. The amount and quality of disclosed information is crucial for their placement in the rating, but also the way how comapnies deal with accidents, whether they inform about it or deploy a harzard prevention and risk management system. Also the producers measures to process associated petroleum gas (APG) during the refinery process matter, some still burn APG instead of using it.

Learn more about the methodology (external link)



As much as some may be surprised in the West: ecology and Russia – this combination is no longer a contradiction today. Not only since the Year of the Environment took place in 2017, the world’s largest country moves slowly but visibly in the right direction in terms of environmental issues: The burning of associated gas in the oil production is decreasing, landfills have been closed, recycling is being promoted by the state actively. Above all Russian oil and gas companies have to offer something, which could boost the EU-countries leap towards a cleaner economy structure: Liquefied Natural Gas (LNG) as a fuel for decentral regions and the transportation sector.

Ecology and Russia – this combination also becomes relevant for companies. Therefore, CREON Group invites to the second Berlin Conference this year. Businessmen and experts from both Russia and Germany will discuss how environmental responsibility can be shaped and improved further. Which solutions can German companies provide for Russian partners who want to tackle the topic? And conversely, can Russian companies contribute to a “greener Europe” by delivering Liquefied Natural Gas (LNG)? These discussions will be supported by the German Eastern Business Association (OAOEV) and the German-Russian Chamber of Commerce (AHK).

During the conference we will present the results of our environmental responsibility rating in Russia’s oil and gas industry. For the fifth time, WWF Russia and CREON conduct the independent rating of major oil and gas companies regarding their efforts and transparency in terms of environmental responsibility: Who renatures oil-contaminated areas? Who is flaring on associated gas, who is not? How transparent are corporations in reporting on ecological issues? In the meantime, the rating has been established as a credible, objective and recognized tool to push the oil and gas companies towards on a more sustainable course. The initiative to conduct Global rating of the 32 biggest world oil and gas companies will be also presented in Berlin.

The aim of the conference is to promote ecological responsibility as a common topic for Germans and Russians. Therefore, we are pleased to welcome high-ranking politicians from both countries, who find common interests in the field of ecology beyond the well-known political dispute topics. Above all, however, entrepreneurs from East and West should be brought together: In Europe’s East, a market is now growing with its awareness of the problem, for which Germany particularly could supply “green” technologies. CREON has set itself the goal of connecting these networks.

 

Venue and Timing

Wednesday, December 05th 2018

Time: 13.00 – 19.00

Hotel Marriott, Berlin (Potsdamer Platz), Inge-Beisheim-Platz 1, 10785 Berlin

 

DOWNLOAD the program here

MORE INFORMATION you may find on our website.



Despite sanctions imposed by US-authorities on Russia, construction of large infrastructure projects continues. Recently Novatek opened the second of four production trains on Yamal peninsula, freezing natural gas down to 164 degrees below Celsius to get it transportable. Next year the capacity of 17,4 million metric tons of liquefied natural gas (LNG) will be reached, but even before this the new Russian energy giant Novatek is widely expected to make an investment decision on a second LNG-factory worth of more than 18 billion Euro. Other huge projects worth dozens of billions are planned or under construction along the Baltic shore and in the Russian Far East.

However, it remains difficult for foreign investors to enter large infrastructure projects such as the gas processing plants or the railway corridor Moscow-Kazan. An obvious reason is that companies themselves hesitate to invest due to sanctions-related risks and uncertainty. But they might be encouraged to invest if governments simplified mechanisms to issue state-guarantees. Creon Capital works closely with the Association of European Businesses (AEB) to achieve progress on this matter.

Several investment projects are stalled because it takes too much time to issues state-guaranties, which are usually being granted to smaller or highly secured projects only. This means in fact that the government does not issue them. Even governmental institutions such as VEB and its subsidiaries require tough preconditions, which are difficult to fulfill. Therefore, the influx of FDI remains limited and both European and Chinese investors hold back their capital to finance projects.

Creon Capital proposes the Russian government to increase its efforts to ease the conditions for state-guarantees, which must include bureaucratic processes, financial preconditions, due diligence, monitoring and decision-making procedures. The existing institutions of industrial development such as VEB and its subsidiaries shall expand their instruments to include a wider range of economic sectors and increase the minimum amount of funding for single projects.

For further information please contact:
Leila Nettaf
T. +352 26 49 79 2203
E. nettaf@creoncapital.lu



Premiere in Berlin: For the first time outside of Russia, the CREON Group presented the widely-established rating of environmental responsibility of oil and gas companies. The study, which CREON conducts together with the World Wildlife Fund (WWF) Russia annually since 2013, was presented at the conference “Ecological Responsibility in the Russian Energy Sector” in Hotel Marriott Berlin. 90 participants witnessed dynamic debates on the prospects of renewable energies in Russia, the country’s deficits in processing associated gas in oil production, LNG refueling of ships as an environmentally friendly alternative to heavy fuel oil.

From the beginning, the aim of the event was to bring together German and Russian companies as well as experts from associations and environmental organizations. German businesses provide various technologies that contribute to a more sustainable oil and gas production. At the same time, the sensitivity to ecology issues is growing among Russian industrial companies, not least due to better state regulation and the attention paid to ecology issues with instruments such as the CREON rating. The practice-oriented event was supported by the German Committee on Eastern European Economic Relations, the German-Russian Chamber of Commerce and Industry (AHK) and the United Nations Development Program (UNDP).

In contrast to other policy areas of German-Russian relations, ecology topics in the energy sector offer considerable scope for bilateral cooperation. Ursula Borak, director of the Federal Ministry of Economics and Energy (BMWi), Deputy Director-General and head of the department “International, fossil fuels and nuclear energy”, emphasized in her speech: “German-Russian energy relations lay the fundament for the economic relations between both countries, which is not only due to their high share in bilateral trade. They also imply great modernization potential for cooperation between Germany and Russia. There are many opportunities for projects where environmental protection and economic interests go hand in hand. Together with our Russian partners, the Federal Ministry for Economic Affairs and Energy supports companies in recognizing and taking advantage of these opportunities.”

Dr. Christiane Schuchart, Russia Director at the German Committee on Eastern European Economic Relations, said: “Mutual investment and joint projects in the energy sector create trust due to their long-term perspective and can thus make a positive contribution to the political rapprochement between Russia and Germany. Environment and climate – and thus all of us – benefit from the fact that German-Russian energy cooperation is becoming “green.” With the topic of ecology in the Russian energy sector, the CREON event stands out in the lush conference landscape.

It is crucial to reduce mutual prejudices and strengthen the exchange of projects related to environmental responsibility. In this sense, the presentation by Natalia Zaytseva, who heads the Center for Sustainable Businesses at the Moscow School of Management Skolkovo, turned out to be a helpful overview. In independent European sustainability rankings, Russia ranks midfield, after all. The number of companies that recognize their responsibility for a sustainable economy is also growing steadily in Russia.

This is in line with the observations of Alexey Knizhnikov, who is responsible for the ranking at WWF Russia: “Four years ago, it was extremely difficult for us to even get data and information on accidents and pollution. In the meantime, especially the big oil and gas companies are getting more and more transparent from year to year, because the pressure of the public is growing. “However, there are still deficits: “Satellite imagery suggests that in the oil production much more accompanying gas is flared than the official data of government and companies claim”, Knizhnikov called an example. Incidents in factories are all too often concealed.

Gazprom, Sakhalin Energy and Nord Stream 2 representatives commented on the criticism: Nikias Wagner, Head of Public Affairs at Gazprom Germania, referred to around one billion euros in expenses that Gazprom invests annually in environmental protection: “I believe this number speaks for itself. “Andrey Samatov, Head of the Environmental Division at Sakhalin Energy, explained his numerous projects to reduce greenhouse gases in liquefied natural gas production. In the Environmental Responsibility ranking of Russian oil and gas companies, Samatov may find confirmation that they are on the right track: Sakhalin Energy took first place in 2017, followed by Exxon Mobil and Surgutneftegaz.

The ecological responsibility event will not be a one-time event in Germany. CREON agreed with the East Committee of German Business and the German-Russian Chamber of Commerce and Industry to organize the event again and expand it next year. “Russia is moving in the field of ecology and sustainability. That is why it is in the interests of the German economy to further develop bilateral economic relations in this field too”, says the Committee’s Managing Director Michael Harms.

Fares Kilzie, Founder and Chairman of the CREON Group, said about future activities: “It is no coincidence that we have chosen Berlin as the location for our first German-Russian ecology conference. Here, German-Russian cooperation is already taking place at a high level, which also confirmed the top-class participation in the conference. CREON is a pioneer in the field of ecological modernization. Now it is time to implement projects together with our German partners.”

Pictures:

1) Ursala Borak (German Ministry of Economy and Energy) held a keynote speech on German-Russian Economic Relations.

2) Andrey Samatov (Sakhalin Energy,  and Alexey Knizhnikov (WWF Russia)

3) Round table discussions during the coffee-break.

 

4) The 2017 Rating of Environmental Resposibility of Russian oil and gas companies is available in English language. 

4) Svetlana Scheynfeld, United Nations Development Program

5) Discussion the perspectives of renewable energies in Russia: Mikhail Babenko (WWF), Georgy Kekelidze (Eurosolar Russia), Thomas Heidemann (CMS Hashe Sigle), Christopfer Frey (Enercon) and Moderator Sebastian Kiefer (AHK).

 

Media contact:

Florian Willershausen
Director Communications
Creon Capital S.à.r.l.
T (GER) +49 151 162 44 591 (WhatsApp)
T (RUS) +7 968 783 84 12
T (LUX) +352 621 235 126
E willershausen@creoncapital.lu
www.creoncapital.lu