Russia’s traditional strength as an energy superpower has relied on its fossil fuel wealth. Yet before its invasion of Ukraine in February 2022, Moscow had also set its sights on taking a leadership role in the global transition to cleaner energy, leveraging its substantial natural gas resources and CO₂ storage potential to become a major supplier of low-carbon hydrogen and carbon storage space to the rest of the world, as well as its vast forests to generate carbon credits.

International sanctions have largely pulled the rug out from under these ambitions, barring access to critical technologies and markets for hydrogen, CCS services and carbon credits, constraining budgets and limiting international investment. Yet the country continues work on pilot stage CCS, hydrogen and carbon credit schemes, albeit at a slow pace, as well as necessary legislation to support them.

These early steps could still help Russia carve out a significant role in the global low-carbon space eventually. If and until there is a rapprochement with the West, Russia could advance towards this aim through increased cooperation with other BRICS members.

Hydrogen

Russia hailed in July the launch of its first green hydrogen plant—a small demonstration facility on the island of Sakhalin in Russia’s Far East, the regional government reported. A collaboration between Russian state nuclear firm Rosatom and several Russian universities and research institutes, the plant’s electrolysers are powered with 300kW of solar panels.

From this humble start, Russia aims to eventually develop Sakhalin into one of several national hubs for hydrogen exports. The test facility is among more than 40 mini-scale low-carbon hydrogen production projects underway across the country, primarily in its northwest, in Siberia and the Far East.

Russia aims to develop Sakhalin into one of several national hubs for hydrogen exports

The Sakhalin demonstration plant is an outlier, however. In its 2021 development concept for hydrogen energy, Russia recognised it was far better-placed to produce blue, rather than green, hydrogen. Derived from methane via steam reforming, blue hydrogen is generally 2–3 times cheaper. And Russia boasts among the lowest natural gas production costs in the world, largely owing to the sheer size of its fields, making its blue hydrogen particularly competitive.

Notably, the next step on Sakhalin involves building a 30,000t/yr blue hydrogen plant. Initially it was scheduled to come onstream by the end of 2026, but Rosatom appears to have pushed its launch back to 2029.

Export goals

Unveiling its grand hydrogen export plan three years ago, Russia’s government said it aimed to capture a fifth of the global market for low-carbon hydrogen by the end of this decade. This remains the goal. Critically, though, Russia does not see hydrogen playing as large a role in the energy transition as many Western governments expect.

The 2021 plan envisaged Russian hydrogen exports reaching 0.2mt/yr by 2024, 2mt/yr by 2035 and anywhere between 15mt/yr and 50mt/yr by mid-century. In the wake of sanctions and other economic and financial fallout from Russia’s war in Ukraine, these targets will be revised. The government already said last year that it expected to produce a mere 550,000t of low-carbon hydrogen by 2030.

For context, by that year the EU expects to produce 10mt/yr of hydrogen and import a further 10mt/yr, although its own court of auditors warned this plan needs a “reality check”.

The original Russian plan identified the EU, Japan and South Korea as the main markets for exports. Hydrogen to Europe was to be delivered primarily via the now-destroyed Nord Stream gas pipelines that ran under the Baltic Sea to Germany.

With the EU aiming to eliminate all Russian energy imports—clean or otherwise—within the next few years, and Japan and South Korea also limiting ties with Russia, the only one of these markets still offering significant potential is China. But a lot will depend on how much low-carbon hydrogen Beijing can produce itself to cover its needs.

Besides Rosatom, other Russian companies developing hydrogen projects include state tech group Rusnano, gas companies Gazprom and Novatek, and hydrogen specialist H2 Clean Energy.

20% – Target hydrogen market share

Any large-scale projects—such as Novatek’s Obsk blue ammonia and hydrogen project in the Arctic—were abandoned not long after the war started, however. Without access to Western technology—key hydrogen production processes are specifically targeted by sanctions—Russian companies have shifted their focus to research and pilot projects in order to develop their own technologies and equipment.

In December 2023, Novatek secured Russian patents for technologies to produce hydrogen via steam reforming and then combine it with nitrogen from the air to produce ammonia, which serves as a hydrogen carrier. The process involved capturing more than 90% of CO₂ for underground storage, the company said. Its patents also covered the cracking of ammonia to arrive at hydrogen again. The technologies are designed for a low-carbon ammonia production train with a capacity of 1mt/yr.

Natural hydrogen

Gazprom, meanwhile, is involved in advancing the planned blue hydrogen project on Sakhalin Island. But the company is also exploring the extraction of natural or ‘white’ hydrogen, found within the giant Kovyktinskoye natural gas field in Eastern Siberia. The company reported in October that it had collected samples from several wells at the field, which supplies gas to China via the Power of Siberia pipeline, identifying formations with hydrogen concentrations of up to 3%. Work continues to find even higher concentrations. Kovyktinskoye is estimated to have a hydrogen content of under 1%, but this could still constitute over 10bcm (840,000t) of the gas in total.

Meanwhile, scientists at the Moscow-based Skolkovo Institute of Science and Technology have proposed an alternative to steam reforming that would involve separating producing hydrogen from natural gas within a field well. The process involves pumping water vapour and a catalyst into the well, and then air or pure hydrogen, and then combusting the natural gas. Hydrogen is then extracted from the syngas mix using a membrane that keeps the CO and CO₂ underground.

CCS

Russia also boasts ample CO₂ storage space to underpin its blue hydrogen export plans and decarbonise hard-to-abate industry more broadly, both domestically and potentially overseas. The government reported last year that the country had the capacity to store at least 4.6bt of CO₂, or almost three times the country’s annual CO₂ equivalent emissions. But this is a very conservative estimate, relating only to proven capacity. Given Russia’s sheer size and wealth of mature and depleted oil and gas formations and saline aquifers, its overall CO₂ storage potential is assessed at over 56bt, dwarfing that of most other countries in the world.

Like low-carbon hydrogen, CCS research and development in Russia is primarily being driven by the country’s oil and gas producers—including Novatek, Gazprom, Gazprom Neft, Rosneft and Tatneft. Rosneft, Russia’s largest oil producer, set a goal in 2021 of sequestering 20mt of CO₂e/yr by 2035, with its first pilot project due to start up in 2028. That same year, Gazprom Neft committed to a 1mt/yr trial project in the Orenburg region, estimating capacity could eventually reach as high as 50mt/yr. Since the war started, though, these plans have been on hold.

Proving a trailblazer, Tatneft became the first company in Russia to begin sequestering industrial emissions underground at scale in early October, capturing CO₂ from its oil refining and petrochemical hub in Nizhnekamsk, Tatarstan, and injecting it into the Biklyanskoye field to boost oil recovery. It estimates CO₂ injection at Biklyanskoye could reach up to 100,000t/yr, with overall storage capacity estimated at 300mt.

Delays are inevitable, given the capital constraints Russian oil and gas companies face because of sanctions as well as the restrictions on technologies. Western sanctions regimes did not specifically list CCS, but many of the necessary technologies are also used in oil refining, which is targeted.

Carbon credits

Low-carbon hydrogen and CCS are just two ways Russia aims to craft a role in the global energy transition. Another is utilising the CO₂ absorption potential of its forests to produce carbon credits that can be sold internationally. The UN estimates Russia has some 815m hectares of forest land, which is more than any other country and is roughly a fifth of the world’s total.

In September 2022, regulation came into force on implementing climate projects that could earn carbon credits. Once more, Sakhalin Island is serving as a testing ground for climate policy, launching a trial emissions trading system last year. The ambitious goal set before the war was for Sakhalin to become the first carbon-neutral region by 2025 through offsets and the increased use of renewables and natural gas to phase out dirtier energy sources.

Sanctions and the collapse in Russia’s relations with the West present the main obstacle to the country establishing carbon credit trading, as those credits must be validated and verified according to international standards. Currently, they are subject only to a national accreditation system. What is more, despite their seeming simplicity, forestry schemes are among the most difficult carbon credit projects to get validated, requiring extensive data collection and analysis to quantify the absorption potential. They are also exposed to natural and other risks, including forest fires, which have become more intense and frequent in Siberia in recent years.

In line with their broader push to strengthen political and economic cooperation, Russia could establish common standards for a carbon market with other BRICS members. Other members of the group, seen as a counterweight to the G7, have also had difficulty in meeting international standards for validation and verification standards for carbon credits. With major emitters such as India and China in the group, this could provide Russia with access to a carbon market representing over half of global greenhouse gas emissions. Likewise, BRICS also offers Russia non-Western aligned markets for its low-carbon hydrogen and CCS services.

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Author: Tim Crawford