Oil and gas expansion: BNP Paribas spares its major clients
A few days before its annual general meeting, BNP Paribas has announced a new set of measures on oil and gas. While welcome, the measures announced are not enough to bring the bank in line with the International Energy Agency’s (IEA) 1.5°C scenario projections or to meet the expectations of scientists and associations calling on BNP Paribas to stop financing oil and gas expansion. Reclaim Finance calls on BNP Paribas to follow through on its commitment and demand that the companies in its portfolios stop developing projects that it no longer intends to finance directly.
In addition to measures restricting its support for unconventional oil and gas, BNP Paribas has announced further steps to complement and clarify the measures announced in January. (1) In particular:
- It has expanded the previous commitment to no longer provide dedicated financing to new oil fields with a similar commitment for new gas fields. (2).
The bank has not made a commitment to no longer finance liquefied natural gas terminals, unlike the Dutch bank ING, even though these projects do not fit into the IEA’s Net-Zero Emissions scenario any more than new oil or gas fields do.
- It has committed not to finance Floating Production Storage and Offloading projects (FPSOs). (3)
This measure, which complements the commitment to stop financing new oil fields, is not enough to meet the objective announced in January of reducing outstanding oil extraction and production financing by 80% by 2030, since the majority of BNP Paribas’ oil and gas financing is provided through financial services provided not to specific projects but to companies. BNP Paribas therefore indicates the following measures:
- a commitment to stop financing specialized oil production companies;
- a commitment to no longer provide reserve-based loans to support oil production; (4)
- to monitor its remaining exposure using the PACTA methodology.
Lucie Pinson, Director of Reclaim Finance: "We welcome BNP Paribas’ clarification as to how it intends to meet the targets announced in January. But precision and ambition are two different things and this new announcement is not enough to overturn the verdict given in January: BNP Paribas will still support its main clients, the European majors and other so-called integrated companies expansion plans, especially gas expansion, even though these companies do not have strategies in place that are in any way compatible with the objective of limiting global warming to 1.5°C. (6)"
The bonds that these companies are particularly fond of are still not covered by the bank’s commitments (7) and the monitoring of outstanding financing until 2030 still allows BNP Paribas to provide new financial services to TotalEnergies and others for many years. Since 2016, the bank, which is the largest banker to Shell, BP and ENI, has provided more than $45 billion to the top 9 European and US oil and gas companies – this represents 27% of the bank’s financing to the entire oil and gas sector (8). Even the measure on reserve-based lending could spare these companies (9).
Lucie Pinson, Director of Reclaim Finance: "Decarbonising one’s own balance sheet without decarbonising the real world is a futile approach and we call on BNP Paribas to follow through by requiring its clients to stop developing projects that it no longer intends to finance directly. It must make the cessation of oil and gas expansion a red line that must not be crossed, and commit to progressively restricting all financial services to companies that do not meet this demand. This is the only way in which BNP Paribas will be able to prevent and protect itself against the risks of a rapidly changing climate."
BNP Paribas claims that these companies are in transition, an argument mainly based on their role in the development of “low carbon” projects (10). But this claim does not stand up to analysis: the Global Oil and Gas Exit List lists the 9 companies above as among the largest developers of new oil and gas fields and analysis of their production targets and capital expenditure shows that renewable energy remains the poor cousin in their strategies, accounting for well under 22% of their energy mix by 2030 (11).
- On unconventional fossil fuels:
- BNP Paribas adds to its existing measures on shale gas, oil sands and Arctic activities with measures on the three other main sectors of unconventional fossil fuels: ending direct financing for ultra-deep water drilling, extra heavy oil and coal bed methane projects and including the last two in the exclusion measures for companies involved in unconventional resources. But their definition of extra heavy oil and the failure to exclude companies involved in ultra-deep water drilling limit the scope of the measure.
- One positive point is the removal of the exception clause which allowed BNP Paribas to maintain support for certain companies deemed to be in transition although significantly exposed to the non-conventional sectors previously covered, or which were developing new projects.
- However, here as with the rest of the measures relating to conventional oil and gas, BNP Paribas does not go so far as to ask its clients active in these sectors to stop developing new projects. This is particularly damaging given the significant impacts and risks of these types of hydrocarbons on people, ecosystems and the climate.
- See BNP Paribas’ announcement. See Reclaim Finance’s reaction to BNP Paribas’ announcements in January 2023. The press release refers to announcements already made concerning the financing of “low carbon” activities. BNP Paribas has also announced decarbonisation targets for the steel, cement and aluminum sectors. Reclaim Finance will provide analysis of these at a later date.
- BNP Paribas becomes the 2nd major international bank, among the 20 largest, to make such a commitment, but other banks have gone further. ING has also stopped new LNG projects, while Crédit Mutuel has committed not to directly finance oil and gas extraction or transport projects. See the Oil & Gas Policy Tracker.
- Several BNP Paribas transactions to FPSOs have been noted in recent years. This measure could be more impactful than the one on the shutdown of new gas fields. According to our information, obtained from the IJGlobal database, the last transaction for new gas fields was in 2019 while BNP Paribas has been involved in at least 3 FPSO transactions since 2020.
- Reserve based lending is a type of loan secured by the oil reserves of the companies taking on the debt. In the event of default, the profits generated by the exploitation of these reserves will primarily go to the banks that provided the credit.
- Far from being in transition, these companies are at the forefront of the opening of new oil and gas fields. Their diversification beyond oil and gas extraction is largely based on the development of new activities that are still dependent on fossil fuels, such as LNG, gas-fired power generation and plastics. See the analysis of the climate plans of the 9 major European and US oil and gas companies.
- BNP Paribas does not include them in the commitments made since January on oil and gas production. A double standard is therefore applied with previous coal commitments and especially with commitments to “green” or “low carbon” categories.
- Based on data from Banking on Climate Chaos, Reclaim Finance, RAN & co, March 2023.
- Loans secured on reserves are used to finance risky businesses, which is rarely the case for large integrated companies, with potential exceptions for the financing of their subsidiaries operating in certain countries.
- Read the interview (FR) with Antoine Sire, BNP Paribas’ Head of Engagement, in La Tribune.
- See Reclaim Finance’s analysis of the climate plans of 9 European and US oil and gas companies.
This article was originally published on Reclaim Finance's website here.