Page 6 - GLNG Week 30

GLNG CommEntARy GLNG
EIB eyes exit from energy projects
The lender will not back any fossil fuel plans from 2021 onwards
invEstmEnt
WHAt:
The Eib is getting out
of the hydrocarbons business, including lNG.
WHy:
The bank is determined to play its part in meeting the paris accord goals.
WHAt nExt:
despite this, Europe is increasingly keen on imported lNG.
THE European Investment Bank (EIB) may end its support for energy projects relying on fossil fuels. e bank has been a mainstay of lending to liquid natural gas (LNG) import projects in the region and – should it follow through with its decision – it will have an impact on future capacity.
e EIB has been linked to a number of pro- posed LNG import projects, including Ireland’s Shannon LNG project and Tenerife’s Granadilla LNG, in addition to pipelines to provide further connectivity to terminals, such as a link from Poland’s Świnoujście and the Interconnector Greece-Bulgaria (IGB) pipeline. It was also involved in providing an €87mn ($97mn) loan for the Lithuanian terminal project. In October 2018, the EIB said it was supporting plans for a network of LNG and compressed natural gas (CNG) fuelling stations in Italy, under an agree- ment with SNAM.
the plan
e institution said its new lending policy had been dra ed with an eye on the Paris accord and, in order to accomplish this, it would “phase out supporttoenergyprojectsreliantonfossilfuels”. ese projects will not be approved for funding a er the end of 2020, it said in its dra energy lending policy, published last week.
LNG terminals and storage have been ruled out, it said, although there is still scope for low-carbon feedstocks such as biogas and syn- thetic gas.
is is a signi cant departure from its 2013 policy. is said supporting gas transmission and LNG projects were “high priority invest- ments”. Providing support to this sector was intended to help the EU market become more liquid and competitive, in addition to delivering supply diversi cation and security.
e new dra noted that fossil fuels would continue to play a role in the world’s energy needs until 2030 and also that moving from coal or oil to gas might reduce greenhouse gas (GHG) emissions in the short term. Investment in these plans is likely to take place with or without EIB funds, it said. e decision for it to move away from fossil fuels will allow it to focus “its limited resources on investments needed to meet the EU 2030 targets and 2050 objectives, which present high investment needs, a longer-term perspec- tive and a greater investment challenge”.
While not supporting fossil fuel use, it will continue providing support for electricity net- works. Furthermore, the EIB energy policy does
not cover the use of LNG in mobility, which comes under the Transport Lending Policy.
e EIB launched a public consultation on its energy lending policies in January, running to March. e dra policy will be considered by the bank’s board on September 10.
Under pressure
This follows sustained pressure on the Euro- pean nancial house on a number of fronts, led by environmental NGOs. A report in March from the Bankwatch Network expressed con- cern about gas projects that have an operational lifespan of as much as 50 years, saying that the world would need to reach “net zero emissions between2040and2055”.
e change is not wholly unexpected. In Feb- ruary, the EIB’s vice president, Andrew McDon- nell, noted the bank was one of the world’s largest energy nanciers. In 2013, the EIB halted lend- ing to coal projects.
McDonnell said the EIB had to nd a balance between “environmental and social concerns”, saying in an opinion piece in Euractiv that it had supported gas projects in order to “keep energy a ordable and secure, as well as to pro- vide backup for renewables”. However, with the energy lending policy changing, he said, “we believe that the gas industry must now explain its decarbonisation strategy and show how it is consistent with EU emissions reduction targets”.
According to a study presented by the Euro- pean Commission, the continent’s gas demand will fall in the three scenarios to 2050.
Given the changing nature of demand, and the EIB’s perceived responsibility to the Paris agreements, a decision on moving away from gas and LNG was inevitable. at said, the path to reducing carbon emissions does run counter to some of the political declarations from the EC.
A statement from the EC noted the progress the EU had made in ramping up imports of US LNG, following a meeting in July 2018 between the head of the EC, Jean-Claude Juncker, and US President Donald Trump. In March, the EU imported a record volume of US LNG, with this expected to double by 2023.
As part of this, the EU is backing new import terminals in Germany, at Brunsbuettel and Wilhelmshaven, in addition to the Świnoujście terminal. While the EIB is taking the long view – to 2030 and 2050 – the EC is focused on trying to a rm links with a US administration that is keenly focused on practicalities. e bank does not have an easy road ahead. ™
tARgEts:
by 2030, the Eu intends to reduce emissions by 40% from 1990 levels, and for 32% of its energy to come from renewables and energy savings of 32.5% compared to the status quo.
loAns:
In 2018, energy accounted for 14.9% of the EIB’s loan stock, following transport and global loans.
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Week 30
01•August•2019