Banking on Climate Chaos 2021

By Rainforest Action Network

This blog was originally published as case studies in “Banking on Climate Chaos: Fossil Fuel Finance Report 2021” — a report by Rainforest Action Network, BankTrack, Indigenous Environmental Network, Oil Change International, Reclaim Finance, and Sierra Club. You can see the full report here.


East Africa Crude Oil

The East African Crude Oil Pipeline (EACOP) is a proposed 900 mile (1,445-kilometer) pipeline under development by China National Offshore Oil Corporation (CNOOC) and the French company Total. The pipeline would transport oil from Hoima in northern Uganda to the port of Tanga in Tanzania, from where it would be exported to international markets. If completed, it would be the longest heated pipeline in the world, and would carry 216,000 barrels of crude oil per day. The transported oil would likely result in over 33 million tons of CO2 emissions each year, an amount significantly greater than the current combined emissions of Uganda and Tanzania. And, importantly, the start of commercial production in Uganda’s Kingfisher and Tilenga oil fields is contingent on the completion of the pipeline — meaning the pipeline would enable the expansion of the oil sector.

Besides fueling the climate crisis, EACOP would enable the opening up of critical ecosystems to oil extraction, including Murchison Falls National Park, one of the most visited parks in Uganda. In addition, the project is expected to cause displacement of communities and could have significant negative impacts on incomes and livelihoods. The valuation and compensation process for the land being acquired for the project has already been characterized by delays in compensation, insufficient provision of information to communities, and irregularities. As such, the project is facing significant local community and civil society resistance.

Total and CNOOC are hoping to secure financing for the pipeline imminently and to start construction in 2021. The banks already supporting this disastrous project are SMBC Group, acting as a financial advisor for Total and joint lead arranger for the project loan; ICBC, acting as a financial advisor for CNOOC; and Standard Bank’s subsidiary Stanbic Bank Uganda, advising the governments of Uganda and Tanzania and acting as joint lead arranger.

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Nigeria LNG

Nigeria LNG Limited (NLNG) is an LNG complex on Bonny Island in the Niger Delta. Among the facilities are six processing units (trains), two export jetties, eight storage tanks, and six gas pipelines that transverse 110 c​ommunities. The plant, which is owned by the Nigerian National Petroleum Corporation, Shell, Total, and Eni, started operation in 1999 and has been expanded many times since.

At the moment, NLNG has a production capacity of 22 million tons of LNG per year. However, the plant is about to be expanded again with the addition of a seventh train, which would increase annual production to over 30 million tons. 

When the complex was first constructed, communities on Bonny Island were relocated to a reclaimed mangrove area, often with the use of a military task force. The new site does not support traditional sources of income such as fishing and cultivating certain crops. To make matters worse, 20 years later the relocated population had still not received compensation.

Additional land will have to be cleared for the construction of the seventh train. Clearing this land, most of which is forestland or swamp, will seriously impact the fauna and flora in the area. In addition, frequent gas flaring at the plant further contributes to climate change and air pollution. The air pollution has a tremendous impact on the health of communities in the area, with gas flaring being linked to kidney problems, cancer, and lung damage, among other problems.

The Nigerian government and NLNG’s shareholder companies have faced continued protests from local communities impacted on multiple fronts by this project. Protests at the turn of the century were tragically met with state violence. Despite these impacts, a long list of banks approved financing for the seventh train in May 2020. These banks include BNP Paribas, SMBC Group, Standard Chartered, Société Générale, ICBC, Deutsche Bank, Bank of China, Santander, and BPCE/Natixis.

Bank data sourced from the IJGlobal database.

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Barents Sea

The Barents Sea is located on the northern coasts of Norway and Russia, within the Arctic Circle. The sea is shallow, with an average depth of only 750 feet (230 meters), and has a unique ecosystem including walruses, polar bears, narwhals, and beluga whales. The sea also contains significant oil and gas deposits, which Norwegian oil companies want to explore, most notably the Norwegian oil major Equinor.

Offshore oil drilling is always risky, but the long distance from land, harsh Arctic weather conditions, darkness, and sea ice make drilling in the Barents Sea even riskier. Since the Arctic is warming faster than any place on Earth, the ecosystems there are already under severe pressure. An oil spill in this region would be catastrophic for the unique ecosystem. The oil industry has no effective way of removing oil from the ice.

In mid-2020 the Norwegian government proposed to open up 125 new oil exploration blocks in the Barents Sea. A few months later, Equinor was given permission to drill an exploration well in the area. Just a month after that, the Norwegian Supreme Court upheld the exploration licenses in the Arctic in a case brought by environmental groups, but left an open question as to whether the discovered oil could actually be produced, given potential greenhouse gas emissions.

Beyond its intent to drill in the Barents Sea, Equinor is on the wrong track overall when it comes to the climate crisis, with plans to increase overall oil and gas production by 300% by 2030. In April and May 2020 Equinor issued over $8 billion in bonds arranged by banks including JPMorgan Chase, Bank of America, Barclays, BNP Paribas, Citi, and Goldman Sachs.

Bank data sourced from the IJGlobal database.

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Offshore Cape Three Points

Offshore Cape Three Points is an integrated oil and gas project in the Tano Basin,  approximately 37 miles (60 kilometers) off the coast of Ghana. The project is run by Eni, Vitol, and Ghana National Petroleum Corporation. It includes, among other things, the development of three gas fields and two oil fields in water ranging from 1,600 to 3,600 feet (500 to 1,100 meters) in depth, a 39 mile (63-kilometer) gas pipeline to the coast, 19 undersea wells, and a floating gas processing, storage, and off-loading (FPSO) unit. The fields’ reserves are significant, estimated at 500 million barrels of oil and 40 billion cubic feet (1.1 billion cubic meters) of gas.

The project is already in operation, with oil production starting in 2017 and gas production in 2018. However, Eni is looking at expanding the project area following the discovery of more gas during exploratory drilling in Offshore Cape Three Points Block 4 in 2019.

Communities nearby are reportedly already experiencing a range of negative impacts from the development and production of the current project area. Fisherfolk face loss of income due to a decline in fish catch. The cost of food — including fish — has risen, along with other commodities. Marine life, especially fish and seaweeds, have also reportedly been affected by pollution from the project and drilling activities.

And yet a range of banks have supported the Offshore Cape Three Points project and associated infrastructure on multiple occasions. Among the banks who financed the oil and gas field development in 2017 are Mizuho, Standard Chartered, Bank of China, BPCE/Natixis, MUFG, HSBC, Société Générale, and ING. In April 2020, BPCE/Natixis, Société Générale, SMBC Group, Standard Chartered, and MUFG were also involved in renewing finance for the FPSO unit.

Bank data sourced from the IJGlobal database.

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Mountain Valley Pipeline

The Mountain Valley Pipeline (MVP) is a 375-mile (600-kilometer) fracked gas project that would run from the Marcellus Shale fields in West Virginia, through Virginia and end with the “MVP Southgate” extension in North Carolina. Originally proposed in 2015 with a $3.5 billion budget, the project is now three years behind schedule, only half-complete, and has more than doubled in cost, making it the most expensive fracked gas pipeline in the United States.

MVP construction has caused long-lasting harm to clean water and habitat for multiple endangered species. State agencies have penalized MVP more than $2 million for over 350 environmental violations of all kinds, including improper erosion control and stormwater mismanagement. If completed, the pipeline could result in 128.7 million metric tons of greenhouse gas emissions annually — equivalent to building 37 new coal-fired power plants. Most damningly, the gas carried by the pipeline is simply not needed, as the bulk of shipping contracts for gas it would carry are held by the same companies developing it, and regional gas demand is dropping.

The Mountain Valley Pipeline has faced staunch opposition from impacted communities and from clean water and environmental advocates challenging flawed and rushed permit processes in court. State and federal courts have rescinded multiple necessary permits; as a result, construction is stalled and MVP currently lacks permits to cross hundreds of waterways along its route.

With no clear path to completion and a price tag of $20 million per month to simply maintain the unfinished project, MVP and MVP Southgate are increasingly a losing bet for banks and investors backing the project. Adding to these financial woes, dozens of groups have launched a new DivestMVP Coalition to pressure MVP’s funders — including Bank of America, Wells Fargo, and JPMorgan Chase — to drop their support of this dirty, dangerous, and unnecessary fracked gas pipeline.

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In British Columbia, construction is ongoing on the Coastal GasLink pipeline, which will bring fracked gas across 420 miles (675 kilometers) from the northeastern part of the province to the LNG Canada terminal, to be liquefied and exported to Asia. The Wet’suwet’en, the Indigenous people of the area, have long fought to assert their sovereignty and stop fossil fuel companies from trespassing on their lands, and have faced militarized police raids in opposing this project. The risks have compounded during the COVID-19 pandemic, as infections spread at worker camps deemed “essential.”

And yet in May 2020, TC Energy, the company behind the pipeline (and the infamous Keystone XL pipeline recently canceled by the Biden administration) secured a $4.7 billion loan to build Coastal GasLink. Twenty-six banks signed up to directly fund this pipeline’s construction, in the midst of the pandemic, even though the project has failed to receive the Free, Prior, and Informed Consent of the five clans of the Wet’suwet’en. In October, the banks upped Coastal GasLink’s allowance by an additional $122 million.

Of the banks covered in this report, the following proved the ineffectiveness of their due diligence procedures by directly funding the Coastal GasLink project:

  • Australia: NAB
  • Canada: Bank of Montreal, CIBC, RBC, Scotiabank, TD
  • China: Bank of China, China Construction Bank, ICBC
  • Japan: Mizuho, MUFG, SMBC Group, SuMi TRUST
  • U.S.: Bank of America, Citi, JPMorgan Chase, Truist

Bank data sourced from the IJGlobal database.

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Energía Coasta Azul

North American fracked gas, especially from the Permian Basin, is one of the world’s major carbon bombs: its continued expansion is flatly incompatible with limiting climate change to 1.5°C. Exporting North American fracked gas in the form of liquefied natural gas is particularly damaging to the climate, with a growing body of research showing that LNG may be worse than coal in the short term.

The industry has been desperate to build LNG export facilities on the Pacific coast in order to cut shipping costs to Asia. But community opposition to fracked gas export infrastructure on the West Coast of the United States and Canada has been fierce, as the Jordan Cove LNG and Coastal GasLink pipeline fights have shown. The industry has been eyeing Mexico’s Pacific coast as an alternative, and after years of pushing, California-based Sempra Energy reached a final investment decision on its proposed Energía Costa Azul (ECA) LNG export terminal, in Baja California, in November 2020.

ECA LNG was the only North American fracked gas export terminal to reach financial close in 2020, showing its backers’ determination to resume business as usual emerging from the COVID-19 pandemic. The project required the first-ever gas export permit from Mexico.

The project, begun as a joint venture by two Sempra Energy subsidiaries — Sempra LNG and IEnova — would convert an existing LNG import facility into an export terminal, sited on what had previously been the last undeveloped stretch of coastline between Tijuana and Ensenada, rich with marine life.

Banks that funded the project include BBVA, BPCE/Natixis, Mizuho, Scotiabank, and SMBC Group. In joining this deal, banks backed a project sponsored by a company with serious red flags in its public track record. Sempra Energy rammed through the Agua Prieta pipeline in the face of fierce opposition by the Yaqui in Sonora, Mexico. In 2015, its Aliso Canyon gas leak was the single worst fossil gas leak in U.S. history, and possibly the single worst greenhouse gas accident in U.S. history.

Bank data sourced from the IJGlobal database.

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