Virtually all UK banks have stopped financing smaller independent oil and gas producers, responsible for most production and investment in the North Sea, revealed Neptune Energy. Changes in the UK tax regime, in particular a windfall tax on oil and gas recently extended until March 2029, have negatively affected the capacity of UK independent producers oil and gas to raise funds. Bank financing for the sector is generally based on the value of reserves, which decreases when there is an increase in the tax rate.
“The future of the North Sea now depends on American or Norwegian banks and not on British banks. If you are not able to generate cash from your existing business, you cannot recycle this capital and invest in the energy transition,” said Julian Regan-Mears, vice president of strategy, integration and corporate affairs at Neptune Energy, during an event organized by Offshore Energies UK in London. Neptune Energy operates the UK’s largest productive gas field, supplying around 6% of Britain’s gas. These smaller producers are now turning to US and Norwegian banks for financing.
Last year, Lloyds has denounced the financing of fossil fuels, joining a growing list of financial institutions in Europe. Lloyds – Britain’s biggest bank – announced it had updated its climate policy and would no longer support direct financing to develop new oil and gas fields. The bank said its new policy prohibits project financing or reserve-based lending for virgin oil and gas projects, although the policy does not exclude providing managed loans general to companies in the sector. Unsurprisingly, climate groups welcomed Lloyds’ decision and called on other British banks to follow.
“Lloyds’ new policy marks a significant turning point in the dangerous relationship between Britain’s major banks and fossil fuel companies.“By becoming the first of the UK’s five biggest banks to stop providing direct finance for new gas, oil and coal projects, Lloyds is taking a clear stand on the future of expansion finance fossil fuels,” Tony Burdon, chief executive of the pressure group Make My Money Matter, told Reuters.
Lloyds is not alone. Major European banks have reduced financing for fossil fuel companies by nearly 30% in the face of growing pressure from shareholders.
Small American Banks Boost Oil and Gas Financing
The situation is diametrically opposite in the United States, where small regional banks have significantly increased their lending to oil and gas companies over the past two years. es. Indeed, Bloomberg reported that regional banks BOK Financial, Truist Securities, Fifth Third Securities, Citizens Financial and US Bancorp saw their combined loans to oil and gas companies increase by more than 70% since the start of 2022, compared to the previous six years. These five banks are now among the 35 largest banks in the world in terms of number of agreements signed with oil and gas companies.
Globally, fossil fuel financing remains dominated by four American banks – JPMorgan Chase, Citi, Wells Fargo et Bank of America – which together represent a quarter of all fossil fuel funding over the past six years. Indeed, the Rainforest Action Network criticized JPM as “the worst banker of global climate chaos, by far.“But these Wall Street banks are not alone. According to a recent analysis by the Private Equity Stakeholders Project and the American Financial Reform Education Fund (AFREF), eight largest private equity firms invested almost as much money in coal, oil and gas as the big banks last year. as Apollo Global Management, Carlyle Group, Blackstone Group, Brookfield Asset Management, KKR et Warbug Pincus, collectively oversaw $216 billion in fossil fuel assets – equal to what the big banks have invested in fossil fuels. Indeed, the 10 largest private equity funds have 80% of their energy investments in fossil fuels.
“The billions of dollars deployed by private equity firms to drill, frack, transport, store, refine fossil fuels and generate energy, contrast with what climate scientists and scientists International politicians have called for aligning our trajectory with the 1.5 degree Celsius warming scenario,” says a report co-signed by major climate groups such as Greenpeace, Natural Resources Defense Project, Sierra Club and the Sunrise Project.
“These polluting assets move from public markets, where there is a greater level of regulatory and public oversight, to the corners of our financial industry, where private equity usually operates,” Riddhi Mehta-Neugebauer, director of research at the Private Equity Stakeholders Project, told CBS News.
By Alex Kimani for Oilprice.com
