(TXF, London, 1 March 2023) The volume of ECA business and the number of deals is down in the Middle East, but at the same time we are seeing higher volume and more deals in North Africa. Industrial diversification is driving the changes of a region in transition. There is a significant evolution taking place in the Middle East and North African (MENA) region in terms of export credit agency (ECA)-backed export and project financing – which over the last few years has largely mirrored the changing industrial outlook and direction of much of the region. Oil/gas revenues in those countries have increasingly become used in sectors such as oil/gas downstream activities, healthcare, social projects, renewable energy, high-tech and productive industries. At the same time, many of the ECAs and banks have now stopped financing new upstream oil & gas projects and are focused on supporting exports and viable projects in other sectors throughout MENA.
Oil & Gas
Netherlands contradicts COP26 promise, moves ahead to support 30 year oil and gas production project in Brazil
(Price of Oil, Washington, 23 March 2023) The Netherlands just contradicted its COP26 pledge to end public finance for fossil fuels by the end of 2022 and shift this money to clean energy by issuing a commitment to insure the Brazil Santos Basin Pre-Salt Pole oil and gas production project for around USD 321 million. The Netherlands published a policy implementing the commitment in November 2022, but it has major loopholes that allow continued fossil support by the Dutch Export Credit Agency (ECA) Atradius DSB. This includes a “transition period” in breach of the agreed end of 2022 deadline, allowing projects that have requested financial support in 2022 to still be approved in 2023.
Parliamentary question on SACE: Fossil fuel subsidies & potential conflict of interest
(ReCommon, Rome, 29 March 2023) The decision by the government of Italy and SACE to break their climate promise made during COP26 in Glasgow has aroused strong indignation. SACE, Italy’s export credit agency, will continue to finance fossil fuel projects abroad until at least 2028, thus reinforcing its position as the leading supporter of the fossil fuel industry in Europe and sixth globally. This is an indignation so strong that it prompted the group Alleanza Verdi e Sinistra in the Chamber of Deputies to present an oral parliamentary question, aimed at clarifying three aspects:
- whether the actions of the Government and SACE disregard the commitments made during COP26
- whether the right steps will be taken to stop public investment and SACE’s guarantees for fossil fuel projects abroad linked to the extraction and transport of fossil fuels
- whether there is a potential conflict of interest where the Chairman of the Board of Directors of SACE is also a member of the Board of Directors of Eni
ENI is an Italian global energy company, active at every stage of the value chain: from natural gas and oil to co-generated electricity and renewables, including both traditional and bio refining and chemicals
Italy waters down fossil fuel pledge as Sace backs gas
(Global Trade review, London, 22 March 2023) Italy has walked away from a pledge to end support for international fossil fuel projects by the end of last year, indicating it will continue to provide export credit cover for parts of the oil industry in the short term and delaying a decision to put an end date on its backing for the gas sector. Sace, the Italian export credit agency (ECA), yesterday published its long-anticipated plan for complying with its commitment alongside other nations at the 2021 Cop26 summit to “end new direct public support for the international unabated fossil fuel energy sector… except in limited and clearly defined circumstances that are consistent with a 1.5°C warming limit and the goals of the Paris Agreement”. Signatories were supposed to have nixed backing for the sector by the end of last year, but the Sace policy shows that the agency did not end support for all exports involving the oil or gas sectors by that deadline. The policy shows that Sace ended support for unabated gas-fired power generation in January this year, but gas exploration and production facilities will still qualify for support until 2026.
Commitment to end international finance for fossil fuels is shifting billions but key countries are missing in action
(Oil Change International, Washington, 15 March 2023) Promise Breakers, a report released today by Oil Change International, reveals that the Glasgow Statement, a joint commitment forged at the 2021 UN climate summit (COP26), is already shifting an estimated USD 5.7 billion per year out of fossil fuels and into clean energy, with the potential of a further 13.7 billion per year if all Glasgow Statement signatories fulfill their commitments. At COP26 in Glasgow, 39 countries and institutions pledged to end international public finance for fossil fuels by the end of 2022 and shift this money to clean energy. This report is the first international assessment of signatories’ implementation of the commitment since the passing of the end of 2022 deadline. The report reveals that while some high-income countries have kept their Glasgow commitment, a group of major providers of international public finance have broken their promise, including Germany, Italy, and the United States. The report contains a detailed report card on each signatories’ policies, with recommendations for improvement.
OECD Arrangement participants fail to clinch modernisation deals
(Global Trade Review, London, 15 March 2023) A meeting of the OECD Arrangement on export credits ended last week without an announcement of a breakthrough on any key planks in its modernisation agenda. The arrangement was created to avoid like-minded countries from undercutting each other on pricing but has been undermined by the fact that major export credit providers such as China and India are not members. Commercial banks, export credit agencies (ECAs), the European Union and governments who host export credit-supported projects have called for changes to minimum pricing, tenors and clear rules on sustainable financing to ensure that OECD ECAs remain competitive and can support a broad range of projects. Oil Change International, an NGO that campaigns for an end to public finance for fossil fuels, says it is disappointed that there was no apparent agreement on the Climate Change Sector Understanding (CCSU) aspect of the arrangement in order to boost incentives for green projects. OCI further notes that “OECD countries failed to conclude negotiations on climate friendly incentives to align Export Credit Agencies, the world’s largest international financiers of fossil fuels, with international climate goals”, adding “the world cannot afford another wasted minute” and reminding them that 175 civil society institutions have called on the arrangement members to end support for fossil fuel projects by their ECAs.
Environmentalists continue to challenge UKEF funding for gas in Mozambique
(Mediarun Search, London?, 13 February 2023) In January, an appeals court rejected the request, but Friends of the Earth wants the arguments to be heard again by the Supreme Court (Portugal’s equivalent of the Constitutional Court). “The funding decision was made without taking into account the impressive emissions from flaring the gas, and without considering how these emissions align with globally agreed climate targets,” they said in a statement. Before passing a judgment, the Supreme Court will first assess the appeal and determine whether it has merit and whether an issue of greater constitutional importance is at stake. British export credit agency UK Export Finance (UKEF) has committed US$1,150 million (€1,077 million) in funding in 2020 to develop an offshore liquefied natural gas (LNG) project in the Rovuma Basin in Cabo Delgado, northern Mozambique. But Friends of the Earth say the environmental impact has not been properly assessed, contrary to the UK’s commitment to comply with the 2015 Paris Climate Change Agreement to limit global warming. The organization estimates that over the years of operation, the project will generate up to 4,500 million tons of greenhouse gases. The project in question, promoted by a consortium led by French oil major Total Energies in the Rovuma basin, was suspended in 2021 after attacks by armed groups in Cabo Delgado province. Worth between 20,000 and 25,000 million euros, the gas extraction megaproject is one of the largest private investments planned for Africa and is supported by several international financial institutions.
Public Financing as a Critical Path Forward to a Just Energy Transition in Africa
(Creamer Media’s Engineering News, Pretoria?, 13 February 2023) With the world population recently crossing the 8 billion mark and Africa expected to contribute more than half of the projected increase in the global population up to 2050, now more than ever, access to reliable, sustainable, and affordable energy is critical for the continent. Given the historical strain between developed economies (which modernized with fossil fuels) and developing economies (now being asked to forgo this route) [while developed country ECAs urge them to expand fossil fuel production!], it is evident that sustainable, long-term global cooperation and energy security will be required to address the need for Africans to have access to sustainable, reliable, and affordable energy… Electricity generation in South Africa and Nigeria accounts for more than 80% of GHG emissions on the continent. In South Africa, coal-fired generation currently accounts for more than 70% of installed capacity and is expected to remain the primary power generation source through 2030… South Africa’s Integrated Resource Plan aims to install 3GW and 9.6GW of solar and wind capacity respectively between 2023 and 2028 as well as 3GW of gas by 2030. In contrast, Nigeria, on the hand has about 13 GW of installed generation capacity, largely dependent on hydropower (12.5%) and thermal power (87.5%). Of this, only 3.5 GW to 5 GW are typically available for onward transmission to the final consumer. Self-generation installed capacity via diesel generator units is estimated to be about 25 GW… Public capital plays an essential role in accelerating energy infrastructure projects in both developed and developing markets. Developing markets especially need continued government-supported financing for renewables and gas power generation to enable an equitable energy transition… To meet global decarbonization goals while continuing to drive electrification and raise the standard of living in developing markets, ECAs and DFIs should strive to become even more engaged to support a broad range of decarbonization technologies. [We ask, what balance is necessary, support of new natural gas power generation projects to replace existing or planned coal assets, or African renewable sources which do not put the onus on Africans to save the planet while sustaining northern consumption excess?]
26 Italian oil and gas companies visit Kuwait with SACE
(Ansamed, Rome, 1 February 2023) Some 26 Italian companies operating in the oil and gas sector visited Kuwait Jan 30-31 as part of a trip organised by the Italian embassy in close collaboration with the Italian Export Credit Agency (SACE), Confindustria, the main association representing manufacturing and service companies in Italy, and the Italian Trade Agency. During the visit, meetings were held including ones at the Kuwait Chamber of Commerce and Industry, the Kuwait Petroleum Corporation (KPC) and the Ministry of Electricity and Water (MEW), as well as in-depth sessions discusing “doing business in Kuwait” curated by KPMG and major Kuwaiti law studios. In his opening remarks, the Italian ambassador to Kuwait, Carlo Baldocci, highlighted significant opportunities for Italian companies in Kuwait..
Insurance giant Marsh under fire over role in controversial oil project
(Inclusive Development International, Asheville NC, 7 February 2023) Ugandan, Tanzanian and U.S.-based human rights and environmental groups have lodged a formal complaint alleging that Marsh is violating OECD guidelines for responsible business conduct by serving as insurance broker for the planned East African Crude Oil Pipeline (EACOP). The complainants are calling for Marsh to drop its insurance brokerage role for the EACOP. Inclusive Development International and 10 human rights and environmental organizations in Uganda and Tanzania, which are remaining anonymous due to fear of reprisals, filed a complaint to the U.S. government today alleging that New York-based insurance giant Marsh, a member of the Marsh McLennan group, violated international guidelines for responsible business conduct by serving as insurance broker for the highly controversial East African Crude Oil Pipeline (EACOP). The groups submitted the complaint to the U.S. National Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises, an office within the U.S. State Department tasked with handling allegations against American companies.
