Energy efficiency and climate change

Climate Change

Sakhalin Energy recognises the criticality of climate change issues and aligns its activities with the global climate agenda. The impact of climate change creates significant risks and implications for the business.

As the global economy transforms towards low-carbon development, the Company has the following priorities: reduced greenhouse gas emissions and increased resilience and adaptivity of operations to the impacts of climate change.

In 2022, Sakhalin Energy developed the Climate Change Adaptation Plan. The scope included:
• analysis and classification of climate risks,
• assessments of the probability and impact of climate risks and opportunities for Sakhalin Energy's operations, and
• analysis of possible risk management measures and assessments of their complexity and applicability to Sakhalin Energy's operations.

The Company considered both transition risks associated with the development of a low-carbon economy model and physical risks associated with changes in natural and climate conditions and other environmental parameters that may affect the reliability of the Company's production processes and assets and affect people's safety and health.

Risk Ranking	Description	Control
Regulatory Risks	Risks associated with the decarbonisation of the global economy and measures taken to toughen regulations on greenhouse gas emissions.	The Company monitors the development of carbon regulations and participates in the development of proposals and discussions of carbon guidelines and regulations.
Reputational Risks	Risks related to the perception by stakeholders of the Company's actions on climate issues.	The Company regularly discloses information on climate risk management and greenhouse gas emissions, taking into account stakeholder requests.
Process Risks	Risks associated with accelerated decarbonisation of the global economy amid the spread of new low-carbon technology.	The Company is focused on enhancing energy efficiency by improving equipment reliability and optimising technological processes.
Physical Risks	Risks associated with changes in natural and climate conditions and other environmental characteristics that may affect the reliability of the Company's production assets and processes and the safety and health of people.	The Company's production assets are designed and constructed with due regard to the impact of extreme natural and climate factors. The Company continuously monitors potential hazardous processes, including riverbed changes, soil erosion, seismic fluctuations and their possible impact on engineering structures at the stage of operation, which makes it possible to take necessary measures in a timely manner.

Greenhouse Gas Emissions

To monitor greenhouse gas emissions and evaluate the effectiveness of mitigation measures, Sakhalin Energy annually quantifies emissions in the following scopes: Scope 1 (direct emissions) and Scope 2 (indirect emissions from imported energy).

The key element in reducing Sakhalin Energy's greenhouse gas emissions is activities aimed at:
• utilisation and flaring reduction of associated petroleum gas,
• inspection and diagnostics of equipment to prevent and control leaks, and
• improvement of the energy efficiency of operation processes.

Energy Efficiency

Sakhalin Energy’s assets are designed using the best available technology aimed at the rational use of natural resources and the prevention or minimisation of man-made impact.

The Company’s key energy efficiency practices are intended to increase the operational reliability of equipment, ensure incident-free operation, and automate the process flow.

The efficient use of energy resources facilitates performance, production optimisation, and mitigation of environmental impact.

The LNG plant is the largest energy consumer among the Company’s assets while remaining a world leader in reliability, performance, and energy efficiency.