RNG SUSTAINABLE DEVELOPMENT REPORT
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Contents 6 Development strategy 6.1 Mining development 6.2 Innovation 6.3 Quality control system 38-58 6.4 Safety and labor protection 6.5 Fire safety 6.6 Industrial and technical safety 6.7 Traffic safety service 6.8 Digitalization of process control systems 6.9 Environmental care 1 Sustainable Development Priorities and reporting principles 7 Regional presence 4-7 59-63 7.1 Climatic and environmental conditions 7.2 Infrastructure projects 7.3 Social projects 7.4 Educational projects 2 Key Sustainability Indicators 8 Corporate Social Responsibility 8-11 64-73 8.1 Personnel Management 8.2 Social projects in Mirny 8.3 Interaction with the small indigenous minorities of the North 8.4 Assistance to the villages of Suldyukar and Tas-Yuryakh 8.5 Natural Park Support 8.6 Participation in cultural projects 3 Message from CEO of RNG company 9 Social Activity 12-15 74-77 9.1 Quality Day Conference 9.2 The first oil and gas forum 4 Board of Directors and Management 10 International Cooperation 16-21 78-82 10.1 Technological cooperation 10.2 Membership in international organizations 10.3 Membership in Russian social organizations 10.4 Membership in self-regulatory organizations 5 Company profile 5.1 Resource base 5.2 Financial performance 11 Glossary 5.3 Key facts 22-37 5.4 Capital construction 5.5 Logistics 83-85 5.6 ISO Standards 5.7 Developed infrastructure
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT Sustainable Development Priorities Innovation Environmental care Investments Technical and Industrial in human capital Safety Partnerships with international Charity companies Sustainable Territorial Development business model Reporting Principles ISO ISO Compliant The methodological basis for the preparation of the Sustainability Report is based on the standards for the Global Reporting Initiative, a global reporting initiative. RNG annually publishes information on sustainable development projects on the official website and thereby adheres to the principles of transparency and openness in its work. 6 7
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT 0.9 Oil production Revenue 25.958 million tons bln. RUB 0.09 0.1 2.135 0.013 2017 2018 2019 2017 2018 2019 Gas production 0.9 Operating costs 17.027 bln. cubic meters (including production costs, administrative expenses and sales expenses), bln. RUB 3.244 0.05 2.032 0.0003 2017 2018 2019 2017 2018 2019 Year-end assets 40.653 Acquisition 19.097 bln. RUB of materials, 24.196 26.797 equipment and 10.165 services 8.439 bln. RUB 2017 2018 2019 2017 2018 2019 Authorized Salaries, other 3.8 capital payments and 3.2 bln. RUB 7.5 7.5 7.5 employment benefits 2.6 bln. RUB 2017 2018 2019 2017 2018 2019 Extra capital Payments to the 0.724 bln. RUB FCMIF and PFR 0.626 bln. RUB 1,218 1,218 1,218 0.492 2017 2018 2019 2017 2018 2019 Taxes and Mandatory 5.4 Payments bln. RUB 0.926 0.28 2017 2018 2019 10 11
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT Message from CEO of RNG company The basic values of our company include the comprehensive development of human potential and active participation in economic, social, cultural and environmental projects in the region where we are present. The most important part of RNG JSC policy is industrial and technical safety and labor protection. The company annually allocates financial resources to maintain a high level of security in the areas of exploration, production and transportation of hydrocarbons. The Eastern blocks of the Srednebotuobinsky oil and gas condensate field have a process control and emergency protection system manufactured by the American company Emerson, the leading manufacturer of such equipment. The company prioritizes environmental protection. RNG JSC environmental experts constantly monitor the state of the air, soil, water resources and biological diversity. One of the key tasks for us is to participate in the social, cultural and economic development of the Republic of Sakha (Yakutia). Our employees participate in a number of educational projects as experts. The company is the general sponsor of publishing projects on Yakutia’s history and nature. We provide financial support to the small indigenous minorities of the Far North and are in constant contact with the leaders of the tribal communities. RNG JSC is one of the largest employers in the Mirny district of the Republic of Sakha (Yakutia). The company employs two and a half thousand people. And we strive to create a large number of jobs, while ensuring the protection of the rights of each employee. The company’s mission is to maintain and strengthen its own economic potential through the current business model, fulfillment of all obligations to the state, employees, contractors, creditors and investors, as well as contributing to the development of the region in which we operate. Vladimir Rakitin 14 15
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT Board of directors Frederick Matthew Thomas Ponsonby (born 1958) is a British peer Graduated from Novosibirsk State University (NSU), Faculty of who was appointed a Lord on April 19, 2000. Geology and Geophysics with a degree in Geophysical Methods of From 1984 to 1986, he worked as an oil engineer at Charterhouse Search and Exploration of Minerals in 1973; Gennady attended the Petroleum. graduate school of the Faculty of Mathematics of NSU, specializing in “Development of methods for solving inverse problems of From 1989 to 1992, he worked as a senior petroleum engineer at geophysics with the aim of forecasting for oil and gas”. LASMO PLC. Gennady ALFERENKO From 1973 to 1985 he worked as the head of the NSU research group From 1994 to 1998, he worked as chief engineer at Phibro Energy, for forecasting oil and gas fields in Eastern Siberia and Sakhalin. being responsible for international research and production projects. Member of the Board of Directors From 1985 to 1992, he was the creator, president and Chairman of Lord Ponsonby was a non-Executive Director of the Emerald Energy the Board of Directors of the Social Inventions Fund. PLC from August 15, 2003 to December 1, 2008 and Chairman of the Frederick Board of Directors of Yakut Energy Limited (formerly major shareholder In 1992, he served as Chairman of the Board of Directors of the Matthew Thomas of Taas-Yuryakh Neftegazodobycha) from January 2013 to the end of Europe-America 500 international consortium to organize and 2013 and Aladdin Oil & Gas AS since July 20, 2010. finance the commercial launch of a satellite from the Plisetsk Space PONSONBY Station to the US Pacific (Seattle) with the participation of the Lord Frederick Matthew Thomas Ponsonby was Chairman and CEO Russian Military Industrial Complex, the Naval Space Forces and Chairman of the Board of Rosehill Energy PLC. He was appointed to several EU government the Naval fleet. bodies, including the Council of Europe in 1997-2001 and the of Directors Organization for Security and Cooperation in Europe in 2001-2010. From 1994 to 1998, he worked as the head of the National Fund and the Strategic Resources of Russia Forum. He is the President of the British-Uzbek public organization. From 1998 to 2000 he worked as the director of Arthur Andersen Currently, Lord Ponsonby is the Chairman of the Board of Directors Company, organizing meetings of the leaders of direct investment of the Eastsib Holding Company Limited and RNG, its wholly owned in the Russian economy. subsidiary. From 2001 to 2002, he worked as an Advisor to the Chairman of the Management Board of JSC Gazprom Bank, and Deputy Chairman of the Strategic Planning Council; member of the analytical working group on long-term investments in the gas industry under the Administration of the President of Russia; Member of the Patriarchal Nikolai Pinchuk holds a PhD in Economics. He was awarded the title Board of Trustees for the revival of the Valaam Monastery. of Distinguished Geologist (the Republic of Sakha (Yakutia). From 2002 to 2007 he worked as Director for Strategic Development He is recognized as a Russian Federation Class II Active State Adviser. at Ernst & Young; Member of the Board of the Council for the Economic Revival of the Russian Orthodox Church, chaired by His Since 1993, he has held the office of supervisor at the Regional Policy Holiness Patriarch of Moscow and All Russia Alexy II, Knight of the Department and is a panel member of the Russian State Committee Order of St. Sergius of Radonezh II degree. Since 2003 - Member of Nikolai PINCHUK for Geology and Use of Mineral Resources. the Board of the Valery Gergiev Foundation. From 1996 to 2001, he was the Russian Federation Deputy Minister From 2005 to 2008 - Member of the Board of Directors, Advisor to Member of the Board of Natural Resources. the President of CJSC Standard Bank. of Directors In 2002, he chaired the Russian Fund for Geological Heritage. From 2008 to 2011 - Senior Advisor to DLA Piper, Russia. Since 2007 - Strategic Advisor to PwC, Russia. Since May 15, 2020 - Member of the Board of Directors of RNG. From 1999 to 2000, Yury Vilochkin held the position of Deputy Head of Administration for the Russian Ministry of Railways. Alexander Bondarenko is a member of the Association of From 2004 to 2010, he was the Vice President at JSCB EVROFINANCE International Petroleum Negotiators (AIPN), Guild of Investment MOSNARBANK. and Financial Analysts (GIFA) and the Chartered Institute of Supply and Procurement (CISP). From 2010 to 2013, he worked as the Chief Security Officer for PJSC Sberbank (Northwest Branch). In 2000-2014 he held the positions of Senior Vice President, Yury VILOCHKIN Deputy President and Chairman of the Management Board at JSCB From 2013 to 2014, he was the Vice President at “Soyuz” Corporation. EVROFINANCE MOSNARBANK. Member of the Board From 2014 to the present, he has been the First Deputy Chief Executive Alexander BONDARENKO of Directors In 2009–2016 he was a partner at the International Law Firm Wragge Officer of OJS “Intestate Development Corporation”. Chairman of the Investment Lawrence Graham CIS LLP. Committee to the Board From 2002 to 2006 he was a member of the Board of directors at NTV, TNT and NTV-Plus TV channels. of Directors Vasiliy Kholmogorov holds the title of Distinguished Lawyer (Republic From 2005 to 2010 he was a member of the Board of directors at of Sakha (Yakutia) and Russia). He is a Distinguished Officer at Russia’s PRIME-TASS Business News Agency. Investigative Committee and a Distinguished Officer with the Russian From 2010 to 2011: Member of the Moscow Exchange (MOEX) Board’s Federation Prosecutor General’s Office. Corporate Governance Committee and Member of the National From 1990 to 1994, he worked as a prosecutor in the Republic of Sakha Settlement Depository Board’s Internal Audit Commission (Yakutia). Vasiliy KHOLMOGOROV In 2013–2014 he was a supervisory director in JSCB EVROFINANCE From 1994 to 2004, he was the Russian Federation Deputy Prosecutor MOSNARBANK. Member of the Board General. In 2000, he was also appointed as the head of the Main Investigative In 2008-2013 - Chairman of the Board of Directors, member of the of Directors Department at the Russian Federation Prosecutor General’s Office. Board directors of Taas-Yuryakh Neftegazodobycha LLC. From 2004 to 2006, he worked as the Advisor to the Russian Federation Prosecutor General and was awarded the Order of the Badge of Honour. 18 19
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT Management board In 2008, Vladimir Rakitin graduated from the Plekhanov From 1986 to 2000, Sergey Nazarov worked as the Lead Russian Economic University, majoring in Finance and Credit. Geologist of the Production Department and Head of Reser voir Engineering Depar tment for SNGDU-2 at In 2013, he received his PhD in Economics. Nizhnevartovskneftegaz (which was later restructured in From 2007 to 2010, he worked as the Direct Investment Project OJSC Tyumen Oil Company). Manager at EVROFINANCE MOSNARBANK. From 2001 to 2005, he was the Chief Geologist at the oil and From 2010 to 2014 he was a senior tax advisor at the Moscow gas production directorate and the Chief Geologist at OJSC Vladimir RAKITIN office of Lawrence Graham (CIS) LLP. Orenburgneft, a subsidiary of TNK-BP. Sergey NAZAROV CEO From 2005 to 2010, he was the Deputy Chief Executive Officer Deputy CEO, and Chief Geologist at LLC “Chepakovskoye” Oil and Gas Chief Geologist Production Company. From 2010 to 2011, he worked as the Deputy Chief Executive Officer and Chief Geologist for LLC RN-Sakhalinmorneftegaz. From 2012 to 2014, he was the Chief Geologist at LLC Taas- Yuryakh Neftegazodobycha. From 1998 to 2011, Evgeny Cherykayev held the position of Oil and Gas Production Foreman, Lead Technologist of the Oil and Gas Production Workshop, Shift Supervisor at the Central Dispatch Office, and Deputy Head of the Central Dispatch Office at OJSC Orenburgneft. Evgeny Cherykayev held the position of Chief Engineer at Taas-Yuryakh Neftegazodobycha LLC. Evgeny CHERYKAEV Deputy CEO, Chief Engineer Konstantin Shikin has vast experience in the construction of oil and gas facilities in Eastern Siberia; he is the holder of various personal awards, such as the Order of Friendship and the Order of the Badge of Honour. He was awarded the title of Emeritus Builder of the Russian Federation. In 2005 -2015 he was a CEO at Vostoksibelektromontazh. He is al so a member of Board of directors at PJSC Konstantin SHIKIN Elektromontazh. From 2002 to 2007, Aleksandr Uskov was the Lead Engineer for Deputy CEO at LLC Pipeline Construction at OJSC Surgutneftegaz, “Fedorovskneft” VostSibSpetsMontazh Oil and Gas Production Department. (wholly-owned subsidiary of RNG Group of Companies) From 2007 to 2012, he was the Supervisor for Technical Construction Supervision at the Uvat Project led by LLC TNK- Uvat. From 2012 to 2014, he was the head of a stand-alone Tyumen Alexander USKOV division at LLC Taas-Yuryakh Neftegazodobycha. Deputy CEO, Head of the Capital Construction Department 20 21
5 Сompany profile
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT 5.1 Resource base 5.2 Financial performance In August 2019, RNG the Eastern blocks of the Srednebotuobinsky oil and The company strives to boost its investment appeal through the effective implementation gas condensate field (EB SB OGCF) were put into commercial operation. On of projects and strong overall financial performance. 01/01/2018, the volume of recoverable reserves (P1 + P2 categories) within the licensed subsoil area was equal to 27.8 million tons of oil, a fact confirmed by the State Committee for Mineral Reserves (protocol No.528484 from 26/12/2017). The field is being developed based on the “Technological Scheme of Development Capital Investment, mln. RUB EBITDA, bln. RUB for the Eastern blocks of the Srednebotuobinskoye Oil and Gas Condensate Field” 1,308 592 1,808 835 (Protocol of the Central Development Commission No. 7187 from 26/12/2017). Its gas reserves are equal to 14.3 bln m3. 4.9 4.9 56 26 By the beginning of 2020, RNG had produced the first million tons of oil QIII 2.4 2.8 from the EB SB OGCF. The average daily production volume is now more than QI 3 thousand tons, compared to 1.6 thousand tons a year earlier. The company 71 75 sends the extracted oil to the East Siberia – Pacific Ocean trunk pipeline. The assessment of the State Reserves Commission was confirmed by the QI QII QIII QIV DeGolyer and MacNaughton Worldwide Petroleum Consulting company as part of the audit of the Eastern blocks of the Srednebotuobinsky oil and gas 1,583 386 2,162 730 CAPEX, bln. RUB condensate field. 67 25 QII QIV 2.7 3 43 87 2.0 2.1 Industrial construction xploratory drilling E QI QII QIII QIV Mineral exploration Equipment not included in the construction estimates Taxes and Payments under contracts Turnover, bln. RUB compulsory with companies controlled 8.3 payments by the state 7.8 5.4 6.07 5.2 4.6 bln. RUB listed bln. RUB listed in 2019 from 2014 to 2019 QI QII QIII QIV The share of procurement of materials and services from Russian and foreign manufacturers, bln. RUB 4.6 4.0 4.1 2.4 0.744 - Russian suppliers 0.123 - Foreign suppliers 2017 2018 2019 24 25
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT 5.3 Key facts Construction 1.2 Personnel 2,500 Employees in the m ln m3 dumped cluster sites and infield driveways company 1,900 employees working in the oil field 31 km pipelines were built 15 km high voltage power lines were built Motor Transport and Specialty Vehicles 600 units are used by the group of companies at the site 300 construction fleet units Field support base in the SB OGCF 26 27
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT Map of the CCP and Well Clusters Group wells №1 Water intake water structure on the Taas Yureh River Well 6343 including utility system: Group - gas pipeline - 4.65 km wells №2 Technical water heater on group wells№1 Group P507 including utility system: gas pipeline - 0.13 km wells №3 Group wells №10 including utility system: - technical passage - 0.3 km - in-field flowline - 0.3 km - water tunnel - 0.3 km P508 including utility system: Group - technical passage - 0.3 km wells №10 - in-field flowline - 0.3 km - high voltage line 35 kW - 2.1 km Group wells №4 P506 including utility system: - technical passage - 0.1 km - gas pipeline - 0.1 km EB SB OGCF Group wells №5 Open-cast №15 Group wells №6 Loop of in-field flowline Gas pipeline - 15.2 km group wells №7- CPF 2.97 km P502 including utility system: Group - gas pipeline - 0.34 km wells №7 Adjusting of the 3rd phase Group wells № 8 including utility system: - technical passage - 2.5 km P509 including utility system: - in-field flowline - 3.1 km - technical passage - 0.3 km - water tunnel - 3.0 km Group - in-field flowline - 3.9 km - water tunnel - 0.3 km wells №8 Group wells №12 Group wells №8 including utility system: - technical passage - 2.5 km - in-field flowline - 3.1 km - water tunnel - 3.0 km P16 including utility system: - technical passage - 2.5 km - in-field flowline - 1.65 km Group wells№ 11 including Open-cast №8 utility system: - technical passage - 1.4 km - in-field flowline - 14.1 km - water tunnel - 13.74 km Group wells №11 Open-cast №20 point Oil pipelines construction F to tie-in Designed oil pipelines Oil pipelines construction e from CP Designed oil pipelines Gas pipelines construction Designed gas pipelines Oil pipilin Open-cast №20 Operating water tunnel Designed water tunnel 2 S№1 OTP a LLC CF - h B S B OG odobyc nes C az fteg ipe li h Ne Oil p Yuryak to OTPS №12 Taas 28 29
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT 5.4 Capital construction 1,000 Construction laboratory and non-destructive testing employees laboratory involved in construction projects 800 km the total length of driveways supported by Internal building control the company at the required technical level (Department of Capital Construction) 744.44 m2 Reconstruction area of the company’s office in Mirny. Three floors were built Independent Construction Control (“StroyTest Engineering” LLC) 150 ton carrying capacity Zoomlion truck crane purchased by the company. It is designed to carry out reconstruction work at various facilities and is one of the most powerful truck cranes in the region Construction of the bridge across the Malaya Botuobuya River Construction of the bridge Construction of the bridge across the Malaya Botuobuya River across the Malaya Botuobuya River 30 31
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT 5.5 Logistics 5.6 ISO Standards – Base with a railway line near the river port of Ust-Kut; The company has GOST ISO 9001-2011 “Quality Management – Production base leased from the American oilfield Systems”, GOST R 54934-2012 (OHSAS 18001: 2007) services company, Halliburton; “Occupational Safety and Health Management System”, GOST R ISO 14001-2016 (ISO 14001: 2015) “Environmental System – 6-ton lifting capacity floating crane in the port of Lensk; management” certificates. – “Boets” tugboat with a 500 ton loading capacity barge; – “Vitimets” tugboat with a loading capacity of 200 tons; – “Codr” tugboat with a loading capacity of 140 tons; – “Ermak” tugboat with a loading capacity of 140 tons; – “Victoria” tugboat with a loading capacity of 200 tons Preparation of the “Vitimets” tugboat for the river navigation season (ports of Ust-Kut and Lensk). 6 tons lifting capacity floating crane in the port of Lensk “Boyets” tugboat with a 500 tons loading capacity barge 5.7 Developed infrastructure Developed infrastructure allows RNG to provide services for the transportation of oil from fields of other subsoil users in the region and the delivery of raw materials to the Transneft pipeline system. Base with a railway line near the river port of Ust-Kut 32 33
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT Power complex CNG filling stations The first phase of the energy complex based on a gas piston engine manufactured by the American company Caterpillar In December 2019, was launched in February 2019 and has a capacity of 5 MW. a natural gas filling Currently, 5 blocks have been installed and put into compressor station (CNG operation. filling station) designed to refuel its own fleet in Associated petroleum gas that comes through the pipeline the Eastern blocks of the from the Central oil collection point on the Eastern blocks of Srednebotuobinsky field the Srednebotuobinsky field is used as an energy source. was put into operation. RNG plans to launch the second and third phases of the The supplier is a leading power complex and increase the total electricity production manufacturer of equipment capacity to 12 MW. for CNG filling stations GRAF S.p.A. (Italy). Compressed gas (compressed up to 200 atm), which has greater frost resistance (especially important during critically low temperatures in the Yakut winter) is used as fuel. The company plans to gradually transfer the vehicle fleet to compressed natural gas. RNG is currently testing the first batch of Shacman X3000 CNG gas tractors. 34 35
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT Map of licensed sites Suldyukar Nyurbinsky uy "Rosneft" ily r. V lgyattinsky Svetlyi "Rosneft" r. V Chernyshevsky ilyu Arylakh y South- Bakhchinsky "Surgutneftegas" Syuldyukarsky West Kempendyayski “EastSib Holding” USRF* Bagdynsky "Surgutneftegas" “Live diamonds of Yakutia” Mirnyi Stanahsky ya Kuyabylansky "Surgutneftegas" tuobu Almaznyi r. V ilyu Tuobuya y an-Bo Irelyachsky "Irelyakhneft" r. Ulah Suntar Kempendyayski Myrninsky Srednevilyuchansky USRF Kubalahsky "INK" "Surgutneftegas" Suntarsky Zaria "Rosneft" "INK" Yuryakhsky Tektyuysky "Surgutneftegas" "Alrosa-Gas" Hoptolokhsky Namansky Tas-Yuryakhskoe Vilyuysko- “Tuymadaneftegaz” USRF The North Blocks field Dzherbinsky "Alrosa-Gas" "Gazprom" "Surgutneftegas" Verhne- Tas-Yuryakh dzhunkunsky Verhnevilyuchnskoe field "INK" Dzhunkunsky Verkhnemarhachansky "Gazprom" "INK" Verkhnebiryuk “EastSib Holding” Ergezheysky “Siberian oil company” Murbaysky "Lensk-Gas" The Central Blocks Monulahsky “EastSib Holding” "Taas-neftegazdobycha" “EastSib Holding” Mukhtinsky The Eastern Bloсks “Tuymadaneftegaz” “RNG” Ulugursky Srednebiryuk South- "Lensk-Gas" "Rosneft" dzhunkunsky "INK" Otradninskoe field GDK Kurungsky Lensk Neft Srednelensky "Taas-neftegazdobycha" "Lensk-Gas" Betinchinsky "Rosneft" Marha Byuksky Hotogo-Murbaysky “EastSib Holding” "INK" "VSNK" Nizhnegerbinsky "Rosneft" “Surgutneftegas” Borulahsky Kaderginsky USRF Urinsky USRF “Tuymadaneftegaz” "VSNK" “Tuymadaneftegaz” ipe line a” gas p of siberi mm “Power 1420 Lensk Chayandinskoye line field oil pipe Okleminsk "Gazprom" “ESPO” 0 mm Cheredeysky Horonohsky 120 Nyuya-Iuzhnaia r. Lena “Siberian oil company” "Surgutneftegas" USRF Cheredey Irkutsk region ena r. L Macha Olekminsky "Rosneft" KuduKuyol Peledui Dikimda Vitim Tokkinsky “EastSib Holding” Chara RNG acts as an agent for the exploration and development of sites belonging to companies that are part of EastSib Holding * - unallocated subsoil reserve fund 36 37
6 Development strategy
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT 6.1 Development of oil production RNG aims to increase oil production over the next 5 years to 1.2 million tons per year. To achieve this, company specialists and partner organizations are developing a plan to increase oil recovery through: • development of a reservoir pressure maintenance system; • implementation of the exploration program; • implementation of the approved well drilling schedule; • implementation of the plan for design and survey work and the construction of ground-based infrastructure facilities (OPS, the second stage of the central control center, expansion of the energy complex to 10 mW). 40 41
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT 6.2 Innovations Implementation of the seismic technology The company invests in innovative technologies in hydrocarbon exploration and production. A seismic team was created in 2019 based on the “Syuldyukar Geologorazvedka” company, which along with RNG is part of EastSib Holding. The company purchased 5 new broadband NOMAD vibrators from the French company Sercel, a recognized international manufacturer of seismic equipment. Today, the company operates modern Sercel 508 XT seismic acquisition systems, NOMAD-65NEO vibrators and GPS Trimble R8GNSS topographic equipment. Vibration is a much more effective method of exploration compared to traditional explosive and impulsive technologies in Eastern Siberia. Explosive technologies are unsafe and wasteful. Pulse technologies do not always allow specialists to obtain sufficient information about the geological structure of the site. Last year, the company’s specialists designed and prepared sites for further exploration. In 2019 and Q1 of 2020, the total area of exploration work was more than 500 sq.km. Modern geophysical equipment is one of the most complex high-precision devices. Staff working and maintaining the data registration system are trained in the French and Russian divisions of Sercel Company. Field parties are equipped with geophysical workshops and laboratories for setting up, repairing and testing equipment. The number of employees in the seismic team is 139 people. Innovative drilling technology RNG specialists successfully applied the new design of the hook-shaped well when developing the Eastern blocks of the Srednebotuobinskoye field. The new design enables the bypassing of the aquifer, thereby avoiding flooding the oil reservoir. A “hook” is a horizontally-inclined well that runs along a complex hook-shaped path. The path is set so that the well is drilled downward first to open and refine the section of the formation, to determine the best reservoir layers and their angles, then the intersection of the SOC and KSS followed by resistance of the resistivity sensor below 10 Ohms. This decrease flattening on the horizontal part of the barrel, which reduces is a signal to flatten the horizontal section of the well 2-3 meters errors concerning absolute depth; to avoid unwanted proximity higher than the depth of the oil hole. with the gas cap and correctly position the part of the barrel If the level of gas-oil contact is not determined during the that will be used for oil production. drilling process, the well may turn out to be ineffective due to Before laying such wells, experts analyze information the incorrect depth of the wiring. To avoid this, other companies from neighboring wells (pilot, exploratory), build a geological drill an additional pilot (test) shaft, which takes up to 7 days of model and predict the depth of the roof of the reservoir, the work and 250 meters of drilling. A hook-shaped well eliminates level of gas and oil-water contacts, which subsequently are the need for a pilot shaft and shortens drilling times, as well as our anchor points. During drilling, using the LWD technology, reducing additional penetration from an average of 250 to 140 the geological service continuously monitors the well for 24 meters. hours, estimates deviations from the anchor points according to the original model, and quickly transmits it to the drilling team with adjustments in the well trajectory. Even in the case when the determination of GNA is ambiguous, the level of GSS is determined with a high degree of confidence by reducing the 42 43
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT 6.3 Quality Control System Construction laboratory and non-destructive testing laboratory Chemical analysis laboratories There are two laboratories at the EB SB OGCF The company controls the quality of construction work at all its facilities. that monitor the quality of oil and diesel fuel. The Several laboratories are involved in quality control: a soil laboratory, a laboratory laboratory has 24 employees. specializing in concrete, cement, a laboratory specializing in gravel and a non- destructive testing laboratory. To monitor the quality of diesel fuel, the following indicators are determined: • density; • sulfur content; Welding quality control • kinematic viscosity; The company uses the following methods • cold filter plugging point; for welding quality control: visual and • pour point; measuring control, radiographic control, • fractional composition. ultrasonic control, capillary and leak detection, as well as electrical control. When monitoring the quality of oil, the following indicators are determined: Seal quality control • density; Methods of controlling the quality of seals: • water content; the density is checked by the cutting ring • content of mechanical impurities; method, weighing in water and in a neutral • content of chloride salts.; liquid; by pycnometric methods; by volume • sulfur content; displacement method, the seal is checked • saturated steam pressure; by test immersion, by standard compaction • paraffin content; method, the elastic modulus is checked by • fractional composition; dynamic loading method; the compaction Testing concrete samples • kinematic viscosity; coefficient is checked by a calculation method. • organochlorine content; • hydrogen sulfide, methyl and ethyl mercaptans. Cementing quality control Quality control of cement material: sampling, grinding fineness, density of normal The quality of commercial oil is monitored cement paste, setting time. throughout the entire preparation process and Concrete quality control: sampling, during acceptance operations. mobility, rigidity, average density, porosity, temperature, composition selection, sampling and production of control samples, Laboratories are equipped with: hardening, storage and transportation of • Automated apparatus for determining the samples, compressive strength, strength by fractional composition, manufactured by non-destructive testing (elastic rebound), Herzog, Germany; frost resistance basic and accelerated • Аutomated apparatus for determining the methods, water permeability accelerated fractional composition, manufactured by method, density. Orbis, Netherlands; • Automated apparatus for determining the Determination of the grain limiting temperature of filterability of diesel composition of crushed stone fuels, manufactured by ISL, France; • Оil and oil product sulfur analyzers manufactured by Horiba, Japan; • Chromatographic complexes for determining the composition of oil and gas manufactured by Chromatek, Russia; • X-ray fluorescence wave dispersion analyzer for determining the mass fraction of chlorine manufactured by SPECTRON, Russia. 44 45
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT 6.4 Health & Safety 6.5 Fire safety The main principles of the Company’s work are to ensure A professional fire brigade was established in labour safety and respect for nature in the implementation of 2015 and is part of the fire safety, civil defense and industrial projects. The primary mechanism of environmental emergency situations department. 17 people are management is managing all systems under the requirements involved in the work of the brigade. The team is of international standards ISO 9001, ISO 14001, and OHSAS divided into 2 fire stations, with distinct locations: at 18001. The Company operates under the current legislation of the central control center and at the NPU-100. Each the Russian Federation, international standards and internal compartment has one fire truck. Each machine is documents of the Company. RNG sets higher requirements for constantly filled with 8,000 liters of water and 450 contractors in the field of quality, labour protection, industrial liters of foaming agent. and environmental safety. The Company pays attention The fire brigade personnel have all necessary to improving the professional level of its employees. RNG protective equipment: special suits, helmets, gloves developed and approved the “Plan for the Prevention and and shoes. Elimination of Emergency Oil and Petroleum Products Spills on the Territory of the Eastern Blocks of the Srednebotuobinskoye Also, to protect the personnel of the fire brigade, Field”. all necessary equipment was purchased, including breathing apparatus for working in smoky conditions. Contracts with specialized subcontractors for the maintenance RNG’s hazardous production facilities (where To protect the forest leased areas from forest fires, oil exploration, production, processing, transportation, mobile block boxes with fire-fighting equipment were storage and use of oil and oil products are carried out, as purchased. For foam fire extinguishing of steel tanks well as to prevent gas, oil and water inflows and open gas RVS-5000 at the Central oil collection point there is a Fire brigade and oil fountains during the construction, well servicing and three-fold supply of foaming agent. exercises workover) have been signed. The activities of all the Company’s personnel in workplace health and safety issues are described in the job and production Actions in fighting manuals. The main regulatory document in the field of labour forest fires protection and industrial safety (LP and IS) in the Company is the “Regulation on the organization of industrial control over A professional fire brigade conducts compliance with industrial safety requirements at hazardous patrols of leased forest areas in the daytime production facilities of RNG”, approved by the CEO of the and at night during periods of special fire company. regime introduced by the administration of the Mirny and Lensky districts. The company There are also several internal documents (orders) in purchased mobile block boxes with fire the field of workplace health and safety, such as “On the fighting equipment designed to protect Implementation of Production Control” (relating to workplace leased forest areas. health and safety), “On the Organization of Production Control during the Operation of Lifting Structures”, “On the The team has repeatedly participated in Organization of Technical Supervision of Safe Operation of extinguishing forest fires in the territory of Pressure Vessels” and others. Mirny district, assisting the administration of Mirny district and forestry. RNG deployed specialists and equipment to assist in the fight against forest fires near the villages of Suntar, Tas-Yuryakh and other settlements. The team received a letter of thanks from the Forestry Department of the Republic of Sakha (Yakutia) for providing assistance in extinguishing forest fires. At least three times a month, specialists primary fire fighting equipment. At the conduct training sessions on extinguishing present time, installation and commissioning potential fires at RNG facilities, including of equipment is underway. The company evacuating personnel. plans to conduct training for a professional fire brigadeto obtain a license from the Before the end of 2020, it is planned Russian Emergencies Ministry in the area to commission the fire extinguisher of “installation, maintenance and repair of maintenance stations (repair, reloading, primary fire fighting equipment”. The license testing, painting of cylinders) at the NPU- will allow the RNG Fire Safety Department to 100 fire station. The company purchased conduct full maintenance of its own primary a complete set of equipment for servicing fire fighting equipment. 46 47
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT 6.6 Industrial 6.7 Traffic safety and technical safety service The company has concluded the following agreements for servicing A road safety service was organized to work on the prevention of road hazardous production facilities: accidents. The main objectives of the service is to create road safety systems and prevent traffic accidents. The tasks of the service also - on the liquidation of emergency oil product spills at oil production, include: storage and treatment facilities and an agreement for servicing • development, implementation of measures to ensure trouble-free gas distribution and gas consumption networks by the gas rescue operation of company vehicles, improving the professional skills of service. In these areas, agreements have been concluded with drivers; the emergency rescue team LLC ASF Security Service. The rescue team is in a constant state of readiness for the localization and • organization of the «Road Safety» campaign; liquidation of accidents at oil, gas and gas production, storage and • monitoring the activities of other divisions of the enterprise related to treatment facilities; resolving issues of ensuring road safety, efficient use of vehicles; • monitoring the release of serviceable vehicles, equipped in accordance - on the liquidation of gas and oil manifestations. In this area, an with the Rules of the road for vehicles on the line; agreement has been concluded with the emergency rescue team LLC Upstream Service. This emergency rescue unit is in a state of • allow only qualified drivers to drive vehicles; constant readiness for the localization and liquidation of accidents • Inspection of road conditions on routes; at oil production facilities. • organization of pre-trip and other medical examinations for drivers, monitoring the availability and correctness of registration of travel and freight documents; • monitoring whether employees comply with the rules and standards of labor protection, production, labor discipline, internal labor regulations; Training and professional • monitoring (escorting) the transportation of dangerous, bulky goods development by special rolling stock. The company annually pays for the following employee training and professional development courses: - labor protection for engineers (24 employees); - labor protection at work at heights (82 employees); - gas and oil manifestation (96 employees); - first аid service (197 employees); - sling work (44 employees); - cradle worker training (22 employees); - serving pressure vessels (41 employees); - air sampling (56 employees); - training on the right to handle hazardous waste (4 employees); - attestation and certification of welders at the National Agency for Welding Control (12 employees); - industrial safety (5 employees). 48 49
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT 6.7 Digitalization OIS Production and USOI In 2019, employees of the company launched the OIS Production system and USOI (system of process control systems of operational production accounting, the formation of daily reports). Both systems - developed by Russian specialists- allow the tracking of dozens of processes and operations: accounting and control of oil production, optimization of field development and operation, standardization of business processes, a monitoring system for maintaining reservoir Automated Process Control System (APCS) pressure, automation of the work of supervisors and so on. In 2018, RNG purchased a process control and emergency protection system manufactured by the American company Emerson. The system allows for a safer System Tasks: • Online tracking of data from production oil, and more efficient production process. • сstandardization of business processes; gas and other wells by reading information The automation system of technological processes is designed to implement • reducing the impact of the «human factor» from Controlwave control system sensors centralized control of the technological process of extraction, preparation, in business processes; from Emerson international company. storage and transport of extracted products; life-supporting systems for • automation of routine operations; monitoring the state of the fire and gas situation, as well as effective protection • optimization of field development and Eldoc System has been implemented for the and timely shutdown of the technological process in case of an accident threat operation; digitalization, cataloging and visualization and its localization, according to specified algorithms. • decision support; of geological documents: • optimization of operating and investment • includes a set of programs and costs. applications for the work of specialists The technology consists of various independent systems: from the geology, development and OIS Production system – in order to maintain drilling departments. Programs enable Distributed Control System (DCS) automated control of technological operational information on the condition quick research results, production reports structures. DCS is also intended to protect the life and health of production of wells, process oilfield information for from the field and drilling reports; personnel, technological equipment, and the environment by detecting and accounting for oil, liquid, gas production, notifying at an early stage leaks of hydrocarbons, as well as preventive measures • daily replenishment of data with the pumping agents into formations: in case of explosions. results of well drilling, core surveys, deep • includes a set of application programs The Emergency Protection System (TEPS) ensures the safety of the process with the help of which geologists, oil and gas samples, seismic surveys, and equipment in order to protect personnel, equipment, material assets and the technologists, and chemical analytical scientific research, magnetic exploration, environment. TEPS is completely independent of the distributed control system, laboratory operators interact to evaluate gravity exploration, geological and and stopping the latter will not lead to failure of this safety-keeping system. and control the technological parameters hydrodynamic models, etc. The Automatic Fire and Gas Safety System (TAFGSS) is a special certified of the wells, including prevention of an system designed for the timely detection of fire and gas hazards, as well as emergency operation. light and sound alerts of central control personnel, and automatic control of the corresponding fire extinguishing installations. The telemechanics system is designed to control and manage field facilities Connection (single wells, crane platforms, SOD receiving-launch units), remote auxiliary RNG Energo LLC is implementing a project for laying facilities, and objects of external production transport systems (oil, gas, a fiber-optic communication line from the territory condensate). of the Eastern Blocks to the Mirny – Lensk highway with further connection to the fiber-optic network of PJSC FGC UES, connecting offices in Moscow, Mirny and EB SB OGCF to form one fiber-optic network and automate the receiving of information from drilling rigs. This communication line will not only provide high-speed digital communications and Internet access to production facilities and shift camps, but will also become a backup communication line for the village of Tas-Yuryakh, where the construction of FOCLs of PJSC Rostelecom is currently being completed. Implementation of electronic document management RNG has an electronic document management system. Acts, accounts, orders, financial reports, contracts, applications for the selection of personnel, the procurement of goods and services, inventory accounting are all passed through an electronic system. 50 51
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT 6.8 Environmental Care Environmental monitoring Taking care of water resources The responsible attitude of the company to issues The company protects the water life of of preserving the ecological balance in the region Yakutia. In 2018-2020, ecologists from RNG is a priority. released 500 thousand Peled baby fish The company conducts environmental (salmon family) into the rivers of Yakutia. monitoring along the Eastern blocks of the The fish were raised in the laboratory at Srednebotuobinskoye oil and gas field following the Chernyshevsky fish hatchery. The the approved Program for 2016-2020, agreed spawn were released into the tributary with the Ministry of Ecology, Nature Management of the Vilyui reservoir, the Aan’aah river, and Forestry of the Republic of Sakha (Yakutia) which flows through the territory of the (10-09/6-1665 from 06/04/2016). Mirninsky District. According to the results of research by scientists of the Russian Specialized organizations (such as The Ammosov Federation Research Institute of Fishery and North-Eastern Federal University Research Institute for Applied Ecology of the North, Oceanography, it is the Vilyui reservoir and its accredited laboratories: Federal State-Funded tributaries that have the necessary food base Healthcare Institution “Center for Hygiene and for salmon fish, the right temperature regime Epidemiology in the Republic of Sakha (Yakutia)”, and all other conditions for its survival and Federal Government Institution “Center for reproduction. In 2021, environmentalists Laboratory analysis and Technical Measurements of the Company plan to release more than in the Republic of Sakha (Yakutia)” and others) are 200,000 fry, and from 2022 more than involved. 180,000 fry will be released annually. Care for the diversity of the wildlife of Yakutia Hunting and fishing are prohibited on the territory of the Eastern blocks of the Srednebotuobinskoye oil and gas field. In 2019, for the first time during observation, flocks of swans and wild ducks could be seen in the area of the raw water intake facility built by the company on the river Taas-Yuryakh The design of the water intake structure allows it to work without using the Taas-Yurekh River resources. The reserves are replenished by flood waters. Water intake structure on the Taas Yureh River, built by the company. Net pit volume 500,000 m3 52 53
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT Solid waste disposal Protection of atmospheric air • Annual effective monitoring of emissions of harmful substances into the air is conducted The company is planning to put a waste disposal site into service on the territory of the by the accredited laboratory of the Center for Hygiene and Epidemiology of the Republic of Eastern blocks of the Srednebotuobinskoye oil and gas field. To neutralize oxidation Sakha (Yakutia), alongside with the instrumental monitoring of emissions from vehicles waste, the company purchased an incinerator that disposes waste of hazard classes (“AutoTest-01.02” devices and “Meta-01MP” smoke meter). III to V. Technical data: • capacity - 10 thousand tons • service life - 25 years • square footage - 2.29 ha • the map for the waste of iv hazard class disposal, with a capacity of 17,856 m3 • sludge storage pits for oil-contaminated waste — 1,600 m3 • sludge storage pit for oil-contaminated soil - 500 m3 • SEER prior approval No. 19 dated 24/08/2018 • to be commissioned in 2020 Land and forest protection • Approval and completion of 193 lease agreements for State Forestry land plots with an area of 3,312.56 ha of forest development projects; • 6 lease agreements for industrial land; •12 lease agreements for forest plots with an area of • The company has permits for the disposal of wastes of I – IV hazard classes; 291,68 ha are to be registered; • The company is licensed to handle hazardous waste; • The total area of forest plots in the Eastern Blocks of Srednebotuobinskoye oil and gas field is 3, 604.24 ha; • Sludge pits of well pads No. 1, 2, 3, 4, 5, 6, 7 are registered in the State Register • In 2015-2019, 531,89 ha of land were reclaimed on the of Waste Disposal Facilities; Eastern blocks of the Srednebotuobinskoye oil and • Availability of a document on approval of standards for waste generation and limits gas field and transferred back to the State Forestry. for their disposal. 54 55
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT Mulching When mulching, the company uses equipment manufactured by the German company AHWI GmbH. The company applies mulching technology everywhere, as the method has a beneficial effect on the soil and plants: • retains water in the soil; • reduces the number of weeds; • prevents soil overheating in summer and freezing in winter; • prevents soil erosion; • prevents the formation of crust on the soil, which improves the absorption of water into the soil; • preserves soil friability; • mulch plants form more subordinate roots. Reclamation program Three quarries (Khoyuk, Botuobinsky, Kudulakhsky) with a total area of 100 hectares were reclaimed in 2018. RNG land reclamation by years: • 2015 – 144.02 ha • 2019 – 24.85 ha Reclamation helps to restore soil fertility. Reclamation is carried out sequentially in two stages: technical and biological. The technical stage includes planning, slope formation, • 2017 – 87.9761 ha • 2020 - 49.0 ha removal and application of the fertile soil layer, the installation of hydraulic and land reclamation facilities, and the burial of toxic overburden. The biological stage includes a set of agrotechnical and phytomeliorative measures aimed at improving the agrophysical, • 2018 – 105.08 ha agrochemical, biochemical and other properties of the soil. 56 57
7 Regional Presence
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT 7.1 Climatic and environmental 7.2 Infrastructure projects conditions VostSibSpetsMontazh LLC, a subsidiary of RNG, is building a bridge across the Malaya Botuobuya River as part of the construction of the Vilyuy A-331 federal highway. The RNG operates in the Mirninsky District of and low temperatures. The average monthly commissioning of the bridge is scheduled for the end of the Republic of Sakha (Yakutia) - in severe air temperature in January falls within the October 2020. The project was presented at the investment climatic conditions and at a considerable range of -28 °C to - 40 °C. Temperatures in forum “Western Yakutia - new opportunities” in Mirny. A two- distance from industry and educational winter may reach -53-57°C. lane bridge 192 meters long will be built in the 1,157 km of institution centres. The Eastern Blocks of the the Vilyui highway and will connect the Mirny and Suntarsky Srednebotuobinsky oil and gas condensate In summer, the maximum temperature districts. In the course of the work of the company, it is also field are located within the Lena-Vilyui Plain reaches +30°C. Snow cover of flat surface necessary to equip access asphalt roads to the bridge. of the Central Siberian plateau, in the area areas is 35-50 cm. The number of snow cover between the Lena and Vilyui river, in the days is 200 per year. VostSibSpetsMontazh also concluded a state contract for mid-channel of the Ulakhan-Botuobuya (the the repair of one of the key transport arteries of the Republic right tributary of Vilyui). The hydrography of of Sakha (Yakutia) of the A-331 Vilyuy highway on the route the district is also represented by the Taas- The main feature of the engineering- Tulun - Bratsk - Ust-Kut - Mirny - Yakutsk. We are talking about Yuryakh river and several other smaller ones. geological conditions of the field is the work on the km 1 295+000 - km 1 310+ 585 section. The length widespread development of permafrost of the site is more than 15 kilometers. The customer is FKU The climate of Mirninsky District is severe rocks that lie to a depth of 400 m. The «Management of the public highway of federal importance» continental, with long, harsh winters and maximum thickness of seasonal thawing of Vilyui «of the Federal Highway Agency.» According to the short warm summers: the average duration 3.5–3.9 m is typical for watersheds covered contract, VostSibSpetsMontazh is due to complete work by of winter is seven months, with clear weather with pine forests. . October 31, 2020. The Vilyuy highway is the only transport corridor between the Irkutsk region and Yakutia through which cargo is delivered for the development of large deposits in the west of Yakutia. Office reconstruction in Mirny RNG completed the reconstruction of the office in Mirny, as a result, the office’s working space increased by 500 square meters, amounting to 1,500 square meters. The company strives to create the most comfortable environment for employees. 60 61
RNG / SUSTAINABLE DEVELOPMENT REPORT RNG / SUSTAINABLE DEVELOPMENT REPORT 7.3 Social projects Employees of RNG are in constant contact with representatives of tribal communities and villages. The company provides assistance in solving everyday social problems. The RNG supplies drinking water to a school in the village of Tas-Yuryakh and in the village of Suldyukar. The company filled in two roads between the school, kindergarten and club in the village of Tas-Yuryakh. The work was completed by its own staff and using special equipment. Crushed stone was provided by GPP Yakutsky Dolerit LLC. 7.4 Educational projects The company participates in educational projects of the Mirny district. Employees of RNG are specialists in the field of automation, production management, oil and gas production in educational projects of Mirny College of Technology. In the project “Process factories for training personnel for the oil and gas industry”, the company is an expert in the field of exploration, production of oil and gas in difficult climatic conditions. RNG also implements the program “Management of changes in the vocational training system for the region’s economy”, developed by the Moscow School of Management SKOLKOVO REGION-PROFI in cooperation with Mirny College. Employees of RNG regularly give lectures on oil and gas topics in educational institutions. Every year, students of specialized universities in the format of student teams participate in a paid summer internship at the field. Student teams The company annually conducts recruitment of student teams among students at higher educational institutions and secondary specialized educational institutions for paid work in the Eastern blocks of the Srednebotuobinsky field. In 2018, summer student teams took part in the construction of the Central oil collection point at the field. The company paid for the work, provided housing, meals and a transfer from the city of Mirny to the Eastern blocks of the Srednebotuobinsky field. RNG provides expert and technological support in organizing the project “Factory of processes for training personnel for the oil and gas industry”. The project was launched by Mirny District Technical College. 62 63
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