ESG

Norilsk's spill bill points to mounting ESG risk, says Fitch

Norilsk’s US$2.1 billion clean-up bill for its fuel spill in the Russian Arctic shows ESG-related risk is on the rise in emerging markets, Fitch Ratings said on Friday.

Staff reporter
Nornickel's Heat and Power Plant No 3 (HPP-3) in Norilsk, above the Arctic Circle in Russia, from where the spill originated

Nornickel's Heat and Power Plant No 3 (HPP-3) in Norilsk, above the Arctic Circle in Russia, from where the spill originated

"We believe that the importance of the environmental factor will continue to increase as new, previously unanticipated environmental risks start to materialise," said Fitch.

Norilsk's spill, which Greenpeace described as one of the biggest oil product accidents to ever have occurred in the Russian Arctic, saw about 21,000 tonnes of fuel leaked into rivers and subsoil near the city of Norilsk on May 29.

Fitch said the scale of Norilsk's damages, which it estimated would equate to a quarter of the company's 2020 EBITDA, was comparable only with Vale's tailings dam collapse in 2019. Vale paid out US$1.4 billion and had US$3.4 billion of provisions outstanding at the end of June.

The fact that Norilsk pointed to thawing permafrost as the trigger for the accident bodes ill for other commodity-focused companies operating in Russia, said the ratings agency.

"Almost two-thirds of Russian territory is in permafrost areas, and this is where many commodity companies operate (including gas producers Novatek and Gazprom).

Global heating will require "significant spending on infrastructure and stricter focus on environmental controls and safety".

"While Novatek's Yamal LNG mega project has propelled the company from a niche Russian natural gas producer into a global LNG player with a 5% share of the global LNG market, it cost the company US$27 billion and required unique technical solutions. It was built on a large number of piles of different sizes and shapes not used on such a scale before to support its stability in permafrost," said Fitch.

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

editions

Mining Journal Intelligence Investor Sentiment Report 2024

Survey revealing the plans, priorities, and preferences of 120+ mining investors and their expectations for the sector in 2024.

editions

Mining Journal Intelligence Mining Equities Report 2023

Access an exclusive, inside look on the quarterly mining IPOs and secondary raisings data and mining equities performance tables with an annual Stock Exchange Comparisons supplement.

editions

Mining Journal Intelligence World Risk Report 2023 (feat. MineHutte ratings)

A detailed analysis of mining investment risks across 121 jurisdictions globally, built on 11 ‘hard risk’ metrics and an industrywide survey.

editions

Mining Journal Intelligence Global Leadership Report 2023: Social licence

Gain insights into social licence trends and best practices from interviews with 20+ top mining company executives and an industrywide survey.