(Energy Portal EU, London, 12 August 2023) The transition to clean energy is sparking intense debates as the climate crisis worsens. While cities, universities, and pension funds across the U.S. have divested from fossil fuels, the divestment movement has faced obstacles. In California, a bill that would have required public pension funds to stop investing in the largest oil, gas, and coal companies was killed for the second consecutive year. The bill’s rejection was due to concerns over its impact on workers’ retirement funds. Banks also play a significant role in the climate crisis by financing governments in dealing with its effects and lending to fossil fuel companies. The frequency and intensity of climate-induced emergencies have overwhelmed scientists and journalists, calling for a new approach to disaster reporting. Instead of treating each disaster as unrelated, climate change should be recognized as the connecting factor among them. Germany recently released a draft policy for the provision of guarantees in the energy sector, contradicting its pledge to end international financing for coal, oil, and gas projects made at COP26. Germany’s export credit agency’s policy raises questions about its commitment to ending fossil fuel funding.
Oil & Gas
OECD Modernisation of the Arrangement on Export Credits
(Sullivan&Cromwell LLP, New York, 10 August 2023) On July 14, the OECD published the revised text of the Arrangement on Officially Supported Export Credits (the “Arrangement”). This forms part of the landmark modernisation of the Arrangement, as previewed in March of this year. The revised text of the Arrangement is intended to allow export credit agencies from participating countries to support a wider range of climate-friendly and sustainable projects on more flexible terms. The main changes are focused on (1) expanding the scope of “green projects” that benefit from more favourable terms; (2) extending repayment terms and introducing greater repayment flexibility; (3) simplifying the Arrangement; and (4) introducing a more robust transparency regime. [As noted in our June 2023 What’s New, the agreement does nothing to restrict oil and gas financing. OECD ECAs supported fossil fuel exports by an average of $41 billion from 2018 to 2020, almost five times more than their clean energy support ($8.5 billion) over the same period. It remains to be seen if allowing for more climate friendly and sustainable finance actually makes it happen.]
Letter to US EXIM opposing Papua LNG
Letter to US EXIM opposing Papua LNG
Cedar Rose reaffirms its longstanding partnership with Sinosure
(ZAWYA, Dubai, 11 July 2023) Cedar Rose, a Cyprus and Dubai based corporate data, credit, risk and compliance firm, has reaffirmed its longstanding partnership covering over 25 years of relationship with Sinosure, a prominent Chinese state-owned enterprise responsible for export credit insurance. Cedar Rose’s services play a crucial role in enabling comprehensive risk assessments for Sinosure. By leveraging Cedar Rose’s Company Credit Reports and analysis services, Sinosure gains access to a wealth of data, including company identification, structure, and financial information. These services are obtained through Cedar Rose’s API, with a particular focus on the Middle East and North Africa (MENA) region. Antoun Massaad, Co-Founder and CEO of Cedar Rose stressed that “The partnership between Cedar Rose and Sinosure has proven valuable in de-risking trading activities, supporting Sinosure’s risk management practices”.
Italy’s SACE breaks climate promise with $500 million guarantee for Peru oil refinery
(Price of Oil, Washington, 11 July 2023) Italy’s export credit agency SACE has approved a $500 million guarantee in loans for the Talara oil refinery in Peru, once again breaking their commitment to end their international public finance for fossil fuels by the end of 2022. SACE is the biggest public financier of fossil fuels in Europe. Between 2016 and 2021, SACE supported EUR 13.7 billion in fossil fuels. A study by Oil Change International last year revealed that SACE is considering financing for international fossil fuel projects with emissions equivalent to more than 3 times Italy’s entire annual emissions. At the UN COP26 climate summit in 2021, 39 countries and financial institutions, including Italy, signed the Glasgow Statement, committing signatories to end their direct international public financing for fossil fuels by the end of 2022. Oil Change International’s Public Finance for Energy Database shows that G20 countries and the major multilateral development banks (MDBs) provided at least USD 63 billion per year in international public finance for oil, gas, and coal projects between 2018 and 2020. This is 2.5 more than their support for renewable energy.
AFRICAN NGOS URGE END OF SUPPORT FOR FOSSIL FUEL PROJECTS IN AFRICA AND SIGN THE GLASGOW STATEMENT
(Environment Governance Institue, Seeta Uganda, 18 June 2023) Thirty four African environmental and human rights civil society organisations and 13 international supporters wrote the African Export-Import Bank (Afreximbank) in anticipation of the 30th Afreximbank Annual General Meeting (AGM) from 18th to 21st June 2023 to urge stronger environmental commitments and actions within the financial sector, noting that the impacts of climate change are increasingly evident across the continent, with vulnerable communities and ecosystems bearing the brunt of these effects, and yet financial institutions such as Afreximbank have continued to invest in the further expansion of fossil fuel projects, thus accelerating the climate emergency. Specifically, they note with great concern that across the region, Afreximbank has continued to support a list of finance fossil fuel projects, which contravenes Article 2.1(c) of the Paris agreement signed by all 54 African countries which calls on parties to make finance flows consistent with a pathway towards low greenhouse gas (GHG) emissions and climate-resilient developments.
Biden breaks climate pledge again with new EXIM LNG approval
(Price of Oil, Washington, 18 July 2023) Last Friday, the Export-Import Bank of the United States (EXIM) — the official export credit agency of the U.S.— insured USD 400 million in revolving credit facilities for global commodities trader Trafigura. The newly approved transaction will allow Trafigura Pte. to purchase liquefied natural gas (LNG) from U.S. exporters to sell primarily to European buyers. “It is alarming that Biden continues to break climate commitments to end international public finance for fossil fuels. Instead, he uses public money to prop up the dirty industry that fuels climate disaster and harms communities, while we suffer record breaking extreme heat. “Other countries like Canada, the UK, and France have kept their promise to end international public finance for fossil fuels, and are already shifting billions of dollars towards clean energy. There needs to be accountability for signatories like the Biden administration for going back on their word.”
Mercuria closes deals worth over US$5bn including first ECA backing by SACE
(Global Trade Review, London, 28 June 2023) Mercuria has secured over US$5bn in new and renewed financing facilities, including its first funding backed by an export credit agency (ECA). The global commodities trader, which focuses on energy products, metals and minerals, says it has closed three financing arrangements from a range of global banks. Among those is a €500mn (US$546mn) multi-currency facility guaranteed by Italy’s ECA Sace, to supply the country with natural gas and LNG. Mercuria group CFO says the deal is the trader’s first ECA-backed transaction and comes after Italy agreed to support a similar financing deal with Mercuria’s rival Trafigura for the supply of metals to the country. While both are import deals, they were struck under Sace’s Push Strategy, which aims to support Italian suppliers’ access to international markets by targeting large foreign buyers. Natixis, Société Générale, UBS and UniCredit are mandated lead arrangers on the facility while Abu Dhabi Commercial Bank is lead arranger. Mercuria Energy Group Ltd is a Cypriot-domiciled multinational commodity trading company active in a wide spectrum of global energy markets including crude oil and refined petroleum products, natural gas, power, biodiesel, base metals and agricultural products.
SACE signs agreement with Saneg for methanol-to-olefin gas chemical complex
(Hydrocarbon Engineering, Surrey, 13 June 2023) Italy’s State Export Credit Agency (SACE) has signed a financial memorandum with Uzbekistan’s largest oil company, Saneg, concerning an innovative methanol-to-olefin gas chemical complex (GCC MTO), that is currently under construction in the Bukhara region of Uzbekistan. Masrur Shakirov, General Director of GCC MTO, said: “Italian financial and technical support have been crucial to the development of this facility from the very beginning. The new memorandum confirms Italy’s ongoing commitment to supporting GCC MTO, while providing substantial new credit facilities to Saneg from Italian financial institutions.” This is the second major agreement recently finalised concerning GCC MTO. On 25 May 2023, Gas Chemical Complex MTO Central Asia LLC signed an industrial gas processing agreement with Air Products to build a methanol production facility. Known as Methanol Island, the facility would have capacity of 1.34 million tpy, as part of the GCC MTO complex.
