BNP Paribas, an African Favourite: No More Financing of Independents, and New Oil and Gas Fields - Africa’s premier report on the oil, gas and energy landscape.

BNP Paribas, an African Favourite: No More Financing of Independents, and New Oil and Gas Fields

By Macson Obojemuinmoin

BNP Paribas, which has been in the process of exiting fossil fuels for several years, is accelerating the financing of low-carbon energy.

A key part of that is immediate phasing out of financing to independent oil companies for projects intended to support oil production (corporate financing or RBL.

“As a founding member of the Net-Zero Banking Alliance, BNP Paribas no longer provides financing dedicated to the development of new oil and gas fields and continues to decarbonise its loan portfolio”. the company says in its most recent update.

The group, known for several years to have been more tolerant of oil and gas transactions in Africa than most of its peers in the Western Hemisphere,  says that its pull back from financing of new oil and gas fields is “regardless of the financing methods”. The Bank has also updated its oil and gas sector policy to reflect this.portfolio. The Group presented its new emission reduction targets for the steel, cement and aluminium sectors in its Climate Report.

At the end of September 2022, the Group’s financing for these projects was already 20% higher than that of fossil fuels, with the objective of devoting 80% of its financing to low-carbon energy by 2030.

To support the economy in its transition to low-carbon, BNP Paribas acts to limit greenhouse gas emissions from its loan portfolios. The Group thus makes strong commitments, aligned with the International Energy Agency’s “Net-zero 2050” scenario, in the sectors with the highest emissions.

BNP Paribas will reduce its financing of oil exploration and production by 80% by 2030 as follows:

– No longer providing any financing dedicated to the development of new oil fields (including project financing, RBL, FPSO;

– Phasing out financing to non-diversified oil exploration and production players (independent oil companies) which is intended to support oil production (corporate financing or RBL);

– Reducing the share of the general corporate-purpose facilities which is allocated to oil exploration and production.

As regards gas exploration and production, BNP Paribas will cease all financing dedicated to the development of new fields. As announced on January 24th, 2023, BNP Paribas is committed to reducing financing for gas exploration and production by more than 30% by 2030 (vs. September 30th, 2022 baseline).

As part of its 2022 Climate Report, BNP Paribas has set new portfolio alignment targets in three key sectors. These targets are informed by the International Energy Agency’s Net Zero Emissions (IEA NZE) by 2050 scenario and are set for 2030, which is considered as the appropriate time horizon when taking into account the respective industries’ decarbonisation inflexion points:

– Steel: a 25% emission intensity reduction vs. 2022 in order to reach 1.2 tCO2/t crude steel.

– Aluminium: a 10% emission intensity reduction vs. 2022 in order to reach 5.6 tCO2e/t aluminium.

– Cement: a 24% emission intensity reduction vs. 2021 in order to reach 0.51 tCO2/t cementitious products.

BNP Paribas confirms that it remains on track with the trajectories announced in 2022 for its first three sectors of focus:

– Oil and gas:  12% reduction in financing for oil and gas exploration and production at year-end 2022 vs. 2020 (targeted 12% reduction by 2025 substantially achieved); emission intensity of 67 gCO2e/MJ at year-end 2022, with a target of <61 gCO2e/MJ by 2025.

– Power generation: financed technological mix of energy sector comprised of 60% renewable energies at year-end 2022 (target of over 66% by 2025) and 7% coal (target of less than 5% by 2025); emission intensity of 179 gCO2/kWh at year-end 2022, with a target of <146 gCO2/kWh by 2025.

– Automotive: increase in the share of electrified vehicles financed in the total automotive portfolio to 14% at year-end 2022, with a target of reaching >25% by 2025; emission intensity of 167 gCO2/km (WLTP) at year-end 2022, with a target of <137 gCO2/km (WLTP) by 2025.

“As BNP Paribas continues to align its loan portfolio with a net zero trajectory, the bank reiterates one of its key objectives from its GTS 2025 plan: to position the Group as a leader in the energy transition, with a target of deploying €200Billion to support its clients’ transition to a low-carbon economy by 2025[5]. BNP Paribas remains both strongly committed to and on track to meet its goal. This is reflected in its n°1 position in worldwide green bond issuance in 2022 ($19.5Billion[6]) as well as in 2023 year-to date ($9 Billion, in addition to $14.2Billion in sustainable bond issuance)”, the company explains.

 

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