Britain has provided more than a billion pounds in support for fossil fuel projects abroad in the last year via the UK Export Finance (UKEF) government department and credit agency, which operates alongside the Department for International Trade, the latest accounts show.
According to UKEF’s annual report published on 18 July, half of all projects that received export credits during the 2016-17 financial year are related to the fossil fuel industry – from oil and gas exploration, infrastructure, petrochemical complexes, and coal mining.
Over the last year UKEF has provided a total £3 billion in support to UK companies exporting products and services overseas. Of the 16 different projects around the world that received export credits, eight of these are tied to the fossil fuel industry and are worth a total £1.06bn. Others include investments in the aerospace sector and a water treatment plant in Iraq.
UKEF works to provide support for UK companies to invest overseas via export credits, loans, guarantees, and insurance against loss. In an effort to boost trade, the loans and insurance is designed to shift the financial risk of exporting goods and services away from businesses – and with a government-backed loan, potentially risky investments may become safer options for companies.
The government agency states that in its decision making, it aims to “take account of factors beyond the purely financial, and of relevant government policies in respect of environmental, social and human rights impacts, debt sustainability, and bribery and corruption.”
In 2010 under Prime Minister David Cameron, the government committed to back clean technologies “instead of supporting investment in dirty fossil-fuel energy production”.
And in April 2016 UKEF adopted the Equator Principles – a risk management framework – “to give UK exporters supported by UKEF confidence that environmental, social and human rights issues that may carry ethical or reputational risk have been given consideration as part of UKEF’s support to relevant projects. In June 2017, we were elected to the Equator Principles steering committee.”
The fossil fuel investments, however, seem to jar with all of this given their impact on rising carbon emissions and the UK’s domestic commitments to tackle climate change.
According to a joint investigation between Greenpeace’s Energydesk and Private Eye published in April, the UK government has provided fossil fuel companies with £6.9 billion in financial support since 2000.
Greenpeace UK‘s senior energy campaigner Emma Gibson told DeSmog UK: “The UK government has promised global leadership on climate change, yet it keeps using millions in taxpayers’ money to bankroll fossil fuel projects all around the world.
“This seems to be an acute case of the right hand not knowing what the left is doing, and it makes no economic or environmental sense. Renewable energy is booming and Britain has done a lot of pioneering work on technologies like offshore wind. Instead of using public money to drive more climate change, ministers should use it to help Britain export clean technologies that can help tackle the problem while creating trading and employment opportunities that will last beyond the fossil fuel age.”
Deals in Ghana, Brazil and Russia
The biggest deal brokered this year was with GE Oil & Gas UK – a British division of US multinational General Electric. UKEF has provided the company an export credit worth £372 million which will be going towards offshore oil and gas development in Ghana.
The local company involved in the project is Vitol Upstream Ghana Ltd., a division of Vitol, a private energy and commodities company. Vitol’s chief executive, Ian Taylor donated £97,000 to the Conservative Party between Brexit and June’s general election.
In the government’s press release announcing the deal it argues the project will help Ghana meet its COP21 climate targets: “This transformational natural gas project will help the country achieve its COP21 commitments for climate mitigation by displacing heavy fuel oil use with gas – equivalent to taking 1.2 million cars off Ghana’s roads each year or planting 152 million trees.”
Oil companies are increasingly looking towards gas as a “lower carbon” or “cleaner” energy venture. While natural gas emits less carbon dioxide than coal or oil, scientists warn the harmful impact of methane emissions cannot be discounted.
The project also received World Bank funding. It too promoted the fossil fuel project as supporting “cleaner, more affordable energy”.
Another significant investment made by UKEF this past year includes £265 million in support to Brazil’s state-owned oil giant Petrobras for offshore oil and gas development.
Petrobras has continued to receive support from UKEF for several years now. This is despite the company having been at the center of a major corruption scandal in 2014 which sparked huge protests in Brazil and led to the impeachment of President Dilma Rousseff last August. Former officials at Petrobras have also been convicted and jailed.
UK offshore mining and dredging equipment services company IHC Engineering Business Ltd also received £62m worth of credit for pipe-laying vessels in Brazil. Another £110m was awarded to IHC for pipe-laying vessels in the United Arab Emirates in contract with Petrofrac.
Russian coal mining company Suek received support via £22m in credit to UK mining equipment company Joy Global. And £47m will go towards expanding an oil refiner in India.
Meanwhile £154m and £31m worth of credits will go to petrochemical complexes in Oman and Saudi Arabia. Petrochemicals are chemical products such as ethylene and propane which are then used to produce a range of products such as plastics, gels and lubricants.
A UKEF spokesperson told DeSmog UK: “UKEF’s mission is to ensure that no viable UK export should fail for lack of finance or insurance, and it supports exports in all sectors. The UK’s oil and gas supply chain is a significant contributor to the economy, employing hundreds of thousands of people and generating over £40 billion in revenue annually.”
“We are also actively seeking to support projects in renewables,” they said, citing an example of a recent agreement signed between the UK and the Government of Kenya to “promote cooperation on renewable sector projects.”
UKEF also recently recruited specialists in renewables projects to its underwriting team, they told DeSmog UK.
The spokesperson added: “While we welcome and encourage applications from companies in the renewable sector, our role is to respond to demand from exporting companies, and we can only provide support where it is requested.”
Photo: Ken Doerr via Flickr | CC 2.0