Oil & Gas

OECD Civil Society Joint Position on ECA oil and gas restrictions

(Oil Change International, Washington, 27 February 2023) Over 175+ organizations from over 45 countries have signed onto a Joint Civil Society Position calling for a robust prohibition on oil and gas finance under the OECD Arrangement on Export Credits. Export Credit Agencies (ECAs) are the world’s largest international public financiers of fossil fuels, supporting an average of over $33 billion USD per year in fossil fuels- which is 7x the amount of their support for renewable energy. The Joint Position calls on OECD negotiators, including the US, EU Commission, Canada, UK, and others, to table a robust proposal on oil and gas prohibition to listen to the science and align the Arrangement with a 1.5C warming trajectory. One week before international negotiators meet at the Organisation for Economic Co-operation and Development (OECD) in Paris (March 6-9) to discuss aligning export finance with international climate goals, more than 175 civil society organizations (CSOs) from over 45 countries have released a Joint Position calling on world leaders to end OECD export finance for oil and gas, and explaining how it can be done. They urge OECD members who consider themselves climate leaders to table a proposal for doing so. The position is also supported by the Co-presidents of the Club of Rome,

LNG at forefront of Dutch Atradius foreign fossil fuel funding

(Argus Media, London, 22 February 2023) The Netherlands is assessing several applications for international fossil fuel projects that could be granted state funding until the end of 2023, most of which target the LNG supply chain. Dutch export credit agency Atradius — in charge of the country’s public financing for foreign fossil fuel projects — received 10 such applications before the end of last year that amount to €3.9bn in state funding if granted, according to a government document. The government in 2021 committed to ending all public financing for international unabated fossil fuel projects by 2022 but granted a one-year exemption to applications that were submitted before the deadline. Six of the 10 applications submitted before the end of 2022 concern transactions related to projects in the upstream sector, including the processing system for a new LNG project, a new offshore LNG project and the construction of a floating production platform for new fossil-fuel infrastructure, the government said today. Other applications concern the supply and delivery of vessels for existing and new fossil-fuel infrastructure. In addition, Atradius already granted coverage commitments for €8.4mn, with three projects related to the sale of LNG and two to the development of a new gas pipeline and the adaption of existing storage tanks. The government said that for “business sensitivity” reasons, it did not disclose the names of the applicants or the country where the projects would be located. The government’s commitment in 2021 to ending public financing for international unabated fossil fuel projects built on a pledge made at the UN Cop 26 climate summit in Glasgow, which had already made room for exceptions “in limited and clearly defined circumstances that are consistent with a 1.5-degree warming limit and the goals of the Paris agreement”. This included projects that “safeguard security of supply in Europe”, such as LNG terminals and infrastructure developed for existing LNG sources, the Dutch government said last year. By Florence Schmit

[Dutch police arrested six climate activists at their homes on January 26th for planning to block the A12 highway to nonviolently demand an immediate end to the government’s annual fossil subsidies. Nearly 40 civil society organizations and more than 1,000 people held a solidarity demonstration on the highway on January 28th – 768 were arrested and another demonstration is planned for March 11.. Dutch and Brazilian CSOs have also written to Dutch officials protesting support for a Brazilian floating production storage and offloading (FPSO) vessel ]

GE secures €1bn agreement with Polish ECA

(Power Engineering International, Maarssen, 20 January 2023) GE and KUKE, Poland’s Export Credit Agency (ECA), have confirmed a €1 billion ($1.1 billion) export finance co-operation agreement which will help facilitate capital investment, and enable a mix of renewable and gas power projects globally through Polish exports and supply chain. Under the agreement, GE will be the second global organisation to use KUKE’s financial instrument from its new export support programme. KUKE’s financing solutions from the programme serve to encourage industry players to invest, manufacture and export technology around the globe, including new markets, while supporting local supply chains in Poland.

Court finds UKEF’s $1.15 bln funding for Mozambique LNG project lawful

(Offshore Energy, Schiedam, 13 January 2023) A London court has ruled that the UK government’s funding of up to $1.15 billion of financing for the Mozambique LNG project led by French energy major TotalEnergies is lawful. According to reports by Reuters, the decision by London’s Court of Appeal dismissed an appeal by the environmental group Friends of the Earth. The group argued that financing for the project was permitted after it was incorrectly judged to be compatible with the Paris Agreement and its goal to limit global warming to 1.5 degrees. The total emissions for the new gas field, which research by the environmental group finds would total some 4.5 billion tonnes of greenhouse gases (GHG) over its lifetime – more than the combined annual emissions of all 27 EU countries, were not calculated as part of the government’s approval process or evaluated against global climate goals, the environmentalists warned. At the time of filing the legal challenge, Leigh Day solicitor Rowan Smith, who represented Friends of the Earth, noted that the Court of Appeal’s answer is likely to be a “defining moment in climate change litigation”.

Public Financing as a Critical Path Forward to a Just Energy Transition in Africa

(Engineering News, Johannesburg 12 January 2023) The path to decarbonizing the energy sector is not a “one-size-fits-all” between developed and developing markets. Given the historical strain between developed economies (which modernized with fossil fuels) and developing economies (now being asked to forgo this route), 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. If we truly want to increase electrification in developing countries in Africa and help provide reliable, affordable, and sustainable energy, policy makers and financial institutions must partner with project sponsors to tailor capital solutions that best fit the region and its countries. ECAs and DFIs along with commercial banks and other multilaterals play a critical role in enabling access to the capital required to deliver a more just and equitable energy transition today and for future generations. In a recent opinion piece, Jonathan Bell, Editor in Chief of TFX News asks “When will sub-Saharan Africa be able to properly see the light?’ and addresses “the jokers that think such countries ought to be moving straight to renewables – they need to ask how could they pay for such projects, and how could any related debt be repaid?” With respect to the Friends of the Earth opposition to the Mozambique LNG project he argues that “some of [those] volumes to be exported were destined to be used in power generation to replace coal and oil generators – a move which would lower carbon emissions globally.” [What’s New Editorial comment: Given that northern industrial development was largely financed on the backs of African slaves, one could also ask why we must hold back on tightening our own belts and coming up with the admittedly huge means to pay for their carbon free investments, in reparation for what we got from Africa, instead of begging for the delay of a long overdue “just” transition to keep ourselves warm.]

Mexico Expects State Oil Giant Pemex to Pay Its Debt Without Government Help

(Yahoo News, Mexico, 3 January 2023) Mexico’s Finance Ministry expects Petroleos Mexicanos to pay debt coming due in the first quarter without government help. Refinancing debt could include but won’t be limited to bank loans, bond issuance, direct financing or financing guaranteed by export credit agencies. After providing the oil company with financial support in recent years, the Finance Ministry now wants Pemex to foot the bill itself unless it doesn’t have enough cash to do so by the end of the quarter… Pemex is the world’s most indebted oil major, with financial obligations of $105 billion by September 2022. It is under enormous financial strain as the Mexican government wants it to halt oil exports and invest in loss-making refineries — all of which while the company fails to stem long-term production declines. Mexico’s oil driller has 188 billion pesos in amortizations due in 2023 and must maintain zero net indebtedness in real terms, it said in its annual financing plan.

“Green” Hydrogen: What role for ECAs?

(ECA Watch, Ottawa, 30 January 2023) A series of articles appearing in our Google Alert searches for “export Credit” point to a number of interesting pieces on ECAs and hydrogen. The IEA has forecasted the global green hydrogen market to grow from almost zero in 2021 to 9-14 metric tons per annum (mtpa) in 2030 and 125-300 mtpa by 2050. Exports are expected to account for 12 mtpa of low-carbon hydrogen by 2030, of which approximately 90% is expected to be “green” hydrogen. Today, less than one percent of current hydrogen production is low-carbon. This means most of the hydrogen we make comes from fossil fuel plants that release carbon into the atmosphere. Development of the green hydrogen industry will require substantial capital and the financing for such projects will have to borrow more from the precedents of offshore wind and LNG undertakings, an Oxford Institute for Energy Studies said in its latest study. That study is based on the project financing cost of what it called an ‘archetype’ project wherein 1 GW of solar power is used to make green hydrogen, which is converted to 250,000 tons per annum  green ammonia for export with a capital cost of $2 billion. Last month’s second Green Hydrogen Summit in Muscat brought together leaders in every aspect of the hydrogen value chain from production and transportation to applications and storage.  Spearheaded by the Omani government, the Summit demonstrated the Sultanate’s ambition to be a global leader in green hydrogen.