Simon Shuster

The World Bank has signed a deal with Russia’s largest oil company, Rosneft, to cut planet-warming emissions by making use of gas from an oilfield rather than flaring it off, Rosneft said on Monday

MOSCOW, Russia; September 30, 2008.- Rosneft will cut the equivalent of 5.3 million tonnes of carbon dioxide emissions in 2008-12, which can then be sold as carbon offsets, under the Kyoto Protocol, to European countries trying to meet climate targets.

Kyoto’s joint implementation mechanism allows investors to fund the reduction of greenhouse gases in former communist countries, then make a profit on these investments by selling the emissions cuts in the developed world.

Developed economies and companies in the West buy these cuts to meet their commitments under the Kyoto Protocol, an international treaty to stave off global warming by reducing the world’s emission of harmful gases such as carbon dioxide.

State-controlled Rosneft will achieve the emissions cuts by harnessing associated natural gas, a by-product of oil production, at the Komsomolskoye oil field in the far northern region of Yamal-Nenets, the company said in a statement.

Associated gas in Russia is most often burned, or flared, wastefully creating pillars of flame that spew carbon dioxide. Trapping the gas for use can result in vast emissions cuts.

Under the deal, the World Bank will act on behalf of the European, Danish, Italian and Spanish Carbon Funds, which will buy these cuts in the form of emissions reduction units (ERUs), which are traded on the global carbon market.

“The World Bank…will formalise transactions with ERUs, as well as monitor and control compliance with procedures governing project implementation,” the Rosneft statement said.

Rosneft is ready to invest 4 billion roubles (US$159 million) in the associated gas project and hopes to sell the ERUs, it said.

Finnish utility Fortum became the first to sign a major deal under the Kyoto mechanisms in Russia this February when it bought more than 5 million ERUs, worth more than US$100 million at the time, from electricity producer TGC-1.

(Reuters)

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