SIBUR Sells Its First Carbon Units

Moscow, 26 March 2012: As part of the largest Joint Implementation (JI) project in Russia, SIBUR has sold its first batch of Emission Reduction Units (ERUs) comprising 1.2 million tonnes of СО_2. The ERUs were acquired by the investment bank JP Morgan, with Sberbank Russia, the Russian carbon unit operator, coordinating the process.

The total volume of the project is 8 million tonnes of СО_2, a capacity achieved thanks to the construction of the second stage of SIBUR’s Yuzhno-Baliksky Gas Processing Plant in the Khanty-Mansijsk Autonomous District. As a result of this project, which was completed in 2009, the plant’s capacity for APG processing increased from 1.5 billion m³ to 3 billion m³ per year.

SIBUR has invested more than 8 billion roubles (over 250 million US dollars) in the expansion of Yuzhno-Baliksky GPP, and, as a result, extraction of the desired cut at the plant has increased to 95% overall. The new complex consists of a booster compression station, drying and low-temperature condensation sections, a propane refrigerating unit, and other auxiliary facilities. The complex is a self-contained GPP, the first facility on such a scale constructed in Russia in the last decade.

The expansion of Yuzhno-Baliksky GPP was made possible due to SIBUR’s partnership with the oil company Rosneft, which supplies associated petroleum gas (APG) to Yuzhno-Baliksky GPP. As a result of their collaboration SIBUR and Rosneft, will take an equal share of earnings from ERUs.

The funds which SIBUR will receive will be invested in the construction of the Vyngapurovsky GPP and the building of infrastructure for transporting APG derivatives - NGLs. The construction works at Vyngapurovsky GPP are expected to be completed in summer this year. After that the capacity of APG supplied from Gazprom Neft JSC’s deposits in the Khanty-Mansijsk Autonomous District to Vyngapurovsky GPP will increase to 2.4 billion m³ per year.

Several projects implemented by SIBUR in the field of APG processing and increasing energy efficiency are either in the project design phase, awaiting approval or are in the process of signing ERU sales contracts.

Note:

For every 1 million m3 of APG burned more than 300 tonnes of polluting substances are emitted into the atmosphere, including nitrogen oxides, soot, carbon monoxide and benzopyrene, which poses a danger to health. Processing APG directly improves the environmental situation in oil producing regions and creates the necessary raw materials base to process hydrocarbon feedstock into polymers, synthetic rubber and gas engine fuel.

The fulfilment of the Kyoto Protocol to the UN Framework Convention on Climate Change allows Russian companies to sell greenhouse gas emission reduction units, earned through the implementation of investment projects, to foreign organisations.

In October 2009 the RF Government signed the ‘Statute on the Implementation of Article 6 of the Kyoto Protocol to the UN Framework Convention on Climate Change’, which appointed Sberbank as the Russian carbon unit operator. Its duties include examining applications and the holding of further competitions for national approval.

On submission of an application to the competition to receive national approval, an investor must develop a project design document (PDD) in accordance with UN procedures, and receive a positive conclusion from the international independent company, accredited by Sberbank. The project must be approved not only in Russia, but also in the receiving country (Yuzhno Balyksky GPP was approved by Great Britain and Switzerland).

The investor of the project, having received all the necessary Russian and international approval, must then complete reports on the monitoring of the project and on their verification by the international independent accredited company. This is necessary to confirm the existence and the implementation deadlines of the project, and also to verify the declared capacity, confirming the reduction in emissions is equal to the amount planned in the project design document. Sberbank will then approve the issuing and transfer of the number of ERUs defined by the monitoring report from the national register to the investor’s account. The final stage sees the investor receiving funds into his Sberbank account from the buyer of carbon units according to the Emission Reductions Purchase Agreement (ERPA).