Image Credits |Upsplash|Tod Gardiner | Visual for Illustration purpose
5 minutes read

US trade agency backs oil and gas drilling in Bahrain

The United States is set to invest public money in the expansion of oil and gas production in Bahrain despite the Biden administration’s pledges to end support for fossil fuel projects overseas.

The US Export-Import Bank (Ex-Im) – a federal export credit agency – is pushing ahead with plans to back the drilling of more than 450 new oil and gas wells in one of the oldest extraction fields across the Middle East.

Ex-Im’s board voted on Thursday to notify US Congress about the potential investment, a required step for projects over $100 million. Observers told Climate Home the Bahrain financing is nearly certain to be secured as early as next month.

At Cop26, the US joined 33 other countries in pledging to end direct public finance for overseas fossil fuel projects by the end of 2022. While most other signatories respected the commitment, the US approved over $2 billion in international fossil-fuel finance last year, according to an analysis by Oil Change International. Exim has been responsible for just under half of it.

“The United States is stalling momentum to end international public finance for fossil fuels globally”, said Nina Pušić, export finance climate strategist at Oil Change International. While the country can help “lead a shift of billions of dollars” from fossil fuels to renewables, approvals like this one “are a huge step backward”, she added.

Oil and gas expansion

Ex-Im’s financing in Bahrain would go towards a $4.2 billion programme to boost production in a nine-decades-old field where new reserves were discovered in 2018.

State-owned company Tatweep Petroleum plans to drill up to 34 new gas wells and more than 420 new oil wells, in addition to the construction of processing facilities and transport networks.

The programme is expected to free up reserves containing 5.2 trillion cubic feet of gas – nearly six times the amount of gas the Kingdom currently produces every year, according to company filings. Oil production should see a more modest uplift.

No new oil and gas extraction project should go ahead if the world wants to keep global warming below 1.5C, according to the International Energy Agency (IEA).

Pumping oil and gas from the expanded Bahraini field is expected to spew over 1.4 million tonnes of CO2 a year in the atmosphere by 2026 – nearly double the emissions recorded there in 2022, according to an environmental assessment submitted by Tatweep.

That does not include emissions generated from end consumers burning the fuels (known as Scope 3), which generally account for up to 90% of the carbon footprint of fossil fuel companies.

Ex-Im’s continued support for fossil fuels overseas has been a source of ongoing tensions.

Two members of an advisory group set up by the Biden administration to bolster Ex-Im climate considerations resigned last week following discussions over the Bahrain project.

Last year former special envoy John Kerry reportedly phoned Ex-Im’s chair Reta Jo-Lewis urging her to delay a decision to fund a nearly $100 million oil refinery expansion in Indonesia, according to Politico. But the agency went ahead with the vote and greenlit the project.

As the US official export credit agency, Ex-Im is influential in directing investment towards specific sectors by offering exporters government-backed loans, guarantees or insurance. The agency acts independently, but its board members are appointed by the US president and confirmed by the Senate. Joe Biden picked the sitting chair Jo-Lewis.

When president Biden took office in January 2021, he issued an executive order calling on federal agencies, including Ex-Im, “to identify steps through which the United States can promote ending international financing of carbon-intensive fossil fuel-based energy”. Months later, the US government signed up for the UN pact in Glasgow.

However, the Biden administration stopped short of directly forcing Ex-Im to adopt a fossil fuel exclusion policy.

“A key issue is the lack of clear guidelines from the US government to Ex-Im and other US agencies to explicitly prohibit new public fossil fuel support”, said Sherri Ombuya, a researcher at Perspectives who wrote a report about Ex-Im policies.

In 2023, Ex-Im approved just under $1 billion worth of funding for projects including an oil refinery in Indonesia and a credit facility to help commodity trader Trafigura sell more US liquefied natural gas (LNG). Oil and gas investments account for nearly a quarter of the agency’s portfolio.

Ex-Im’s arguments

Ex-Im has repeatedly justified its fossil fuel financing by pointing to a “non-discrimination” clause in its charter. The provision prevents the agency from rejecting funding applications just because they concern specific industries, such as oil and gas.

But Ombuya said that “is not a fully valid argument”. She added that Ex-Im’s board could turn down applications “if they don’t align with the US climate commitments which would effectively lead to the rejection of oil and gas projects”.

Campaigners also argue that the agency could expand the use of existing tools to screen projects against certain thresholds of greenhouse gas emissions without singling out specific sectors. Ex-Im already applies criteria to projects with “high carbon intensity”, effectively ruling out any funding for coal power plants.

Friends of the Earth filed last December a legal complaint against Ex-Im at the Organisation for Economic Co-operation and Development (OECD) arguing that the agency is breaching a requirement to draw up emission reduction plans and avoid causing environmental damage.

Win for American fossil fuel firms

Ex-Im says its mission is to support American jobs. It does so by helping US companies secure lucrative foreign contracts with its backing.

Last year Jo-Lewis met government officials and corporate executives in Bahrain to “expand ExIm’s footprint in the region and facilitate new opportunities for U.S. exporters in Bahrain.”

The Bahrain project will see the involvement of SLB (formerly known as Schlumberger), the world’s largest oilfield services provider.

The Houston-based company specializes in finding oil and gas deposits, drilling wells, and managing reservoirs to boost production. SLB was involved in the discovery of the new oil and gas reserves in central Bahrain and in March 2021 it won a $225 million contract for their developmen

Legal Disclaimer:
ClimageTechangenews
GLOBAL FLOW CONTROL provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above. "

Latest News

  • Petro (Chemicals)
    1 minute read

    Lummus and MOL to Collaborate on…

    19 Jul. 2024 | Global Flow Control
  • Power Generation
    1 minute read

    Kazakhstan explores plans for nuclear power…

    19 Jul. 2024 | Global Flow Control
  • Water and Wastewater Management
    2 minutes read

    Intesa and ACEA Sign Landmark €20…

    19 Jul. 2024 | Global Flow Control
  • Hydrogen and Carbon Capture
    9 minutes read

    New Hydrogen Hub on California’s Horizon

    19 Jul. 2024 | Global Flow Control