Oil producers fret as multilateral agencies, funders halt financing for new projects
Some institutional investors and multilateral organisations like the World Bank and the European Investment Bank are placing a freeze on financing new oil projects, a development that could hurt Nigeria, largely dependent on oil.
This is why many oil producers are reforming their sectors and easing fiscal policies to get a head-start in the race to attract fast dwindling capital.
Oil projects are facing threats from pandemic-driven demand destruction, and a relentless call for mitigating climate change impacts by cutting back on funding oil projects is forcing executives to consider that vast oil and gas reserves may end up undeveloped.
Over 1,110 institutions have now committed to policies blacklisting coal, oil and gas projects from new investments. These include sovereign wealth funds, banks, global asset managers, insurance companies, cities, pension funds, health-care organisations, universities, faith groups and foundations, according to Canada-based Anadolu Energy.
European Investment
Bank (EIB), the EU’S financing department, has announced plans to bar funding for most fossil fuel projects.
Under the new policy, energy projects applying for EIB funding will need to show they can produce a kilowatt hour of energy while emitting less than 250 grams of carbon dioxide, a movewhichexcludestraditional gas-burning power plants.
The EIB’S decision comes after EU finance ministers last year unanimously backed the phasing out of funding of fossil fuel projects to help combat climate change.
Gas projects are still possible but would have to be based on what the bank called “new technologies” such as carbon capture and storage, combining heat and power generation, or mixing in renewable gases with the fossil natural gas.
Also, World Bank Group has previously announced it will cease to finance upstream oil project from 2020, claiming its decision would “align its support to countries to meet their Paris goals”.
Chief executives and board members from more than 30 banks met at the UN last year to pledge their support
for the “Principles for Responsible Banking” which include alignment with the Paris Agreement. They should all be working on plans to phase out fossil fuel finance.
Other institutions that have expressed interest to divest include Norway’s sovereign wealth fund, the Catholic Bishops’ Conference of the Philippines, the Rockefeller Brothers Fund, the British Medical Association, Amundi Asset Management, Caisse des Depots, New York City, the City of Cape Town, KFW Group, Stockholm University, the Tate museums in the UK, Allianz Insurance, and St Mary’s Episcopal Cathedral, Edinburgh – the first cathedral in the world to divest.
For example, Norway which racks in about $1 trillion sovereign wealth fund that’s come handy in softening the impact of the pandemic also prides itself on being a leader in the green transition. It’s got the biggest share of electric cars per capita, sponsors rainforest preservation across the globe and even claims its oil is just about the cleanest in the world thanks to low emissions in the production phase.