Report calls LNG ‘a false solution’ harming the climate, urging banks to stop financing export terminals

Non-governmental research and campaigning organization Reclaim Finance and BankTrack, an international tracking, campaigning, and civil society support organization targeting private sector commercial banks and the activities they finance, have published a report asking banks to stop financing liquefied natural gas (LNG) export terminals which they believe are causing damage to the environment.

According to the report ‘Frozen gas, boiling planet: How bank and investor support for LNG is fueling a climate disaster,’ global plans to build new LNG export terminals could unleash more than 10 gigatonnes of greenhouse gas (GHG) emissions.

While many new developments, such as Adnoc’s Ruwais LNG, claim to be low-carbon, the 63 planned new export terminals are set to produce large amounts of GHG emissions by the end of the decade, largely due to methane leaks, the report alleges. This is almost as much as the annual emissions of all the coal plants in operation worldwide. These projects also put the local populations at risk due to their “dangerous” levels of air pollution.

The report states that LNG development is booming, despite International Energy Agency (IEA) projections showing over-capacity for the sector in the recent ‘World Energy Outlook 2024’ report. Oil and gas companies such as Shell, TotalEnergies, and QatarEnergy intend to massively expand their operations, with 156 new LNG terminals planned by 2030.

Furthermore, earlier this year, the Institute for Energy Economics and Financial Analysis (IEEFA) warned of a potential oversupply within two years due to a slow LNG demand growth coupled with a rise in global export capacity through 2028.

New LNG projects keep emerging, and their expansion depends on the support of banks and investors. According to the report, banks provided $213 billion for LNG expansion between 2021 and 2023, while investors held more than $252 billion in investments in LNG expansion as of May 2024.

The majority of finance for LNG expansion comes from a few international banks, with the top 30 banks providing 71% of all the financing between 2021 and 2023. Japanese and U.S. banks – more specifically, Mitsubishi UFJ and JPMorgan Chase – are at the head, with European banks being responsible for more than a quarter of LNG expansion support. Santander, ING, Crédit Agricole, Deutsche Bank, HSBC, Intesa Sanpaolo, and BPCE are all in the top 30 LNG expansion backers, notes the report.

Investors in the United States, which was poised to become the world’s largest LNG exporter at the end of 2023, are said to account for 71% of the total investment in LNG expansion as of May 2024, with BlackRock, Vanguard, and State Street topping the list. Even though Canada is second on the list, the country provided significantly less funding for LNG export terminals, with Canadian investors accounting for 6% of total investor exposure.

According to Reclaim Finance campaigner Justine Duclos-Gonda, the LNG projects planned by oil and gas companies put the future of the Paris Agreement in danger.

“Banks and investors claim to be supporting oil and gas companies in the transition, but instead they are investing billions of dollars in future climate bombs. LNG is a fossil fuel and new projects have no part to play in a sustainable transition. Banks and investors must take responsibility and stop supporting LNG developers and new terminals immediately,” said Duclos-Gonda.

Although most of the 30 biggest banks backing LNG expansion have adopted net zero targets, none have excluded LNG developers from access to financing, even though most LNG expansion is financed at the corporate level. Additionally, none of the investors have a policy on LNG.

Some banks have limited restrictions on project financing. ING is said to be the only major bank that has committed to ending all financing for new LNG export terminals from 2026. While Barclays, BNP Paribas, BPCE, Crédit Agricole, HSBC and Société Générale have introduced some restrictions on LNG export terminals finance, they do not rule out all financing for these terminals.

“There is no need for additional LNG export capacity. Banks still financing LNG export terminals and companies are focused squeezing every last penny out of the industry before global oversupply kicks in,” noted Rieke Butijn, Climate campaigner and researcher at BankTrack. 

“On the demand side, financing LNG import terminals delays the much-needed just transition. While banks will secure their profits, it’s at the expense of frontline communities who often will not be able to get their livelihoods, health, or loved ones back. People from the US Gulf South to Mozambique and the Philippines are rising up against LNG and banks need to listen.”

According to the report, the lack of restrictions on bank and investment finance is fueling the LNG boom, with new projects planned to connect gas fields in exporting countries such as the United States, Canada, and Mexico with demand in Europe, South and Southeast Asia.

Examples include Eni’s Rovuma LNG project in Mozambique, whose final investment decision (FID) was recently pushed by one quarter, and Rio Grande LNG in the United States. The latter hit a snag in September when the U.S. Court of Appeals for the D.C. Circuit revoked the reauthorization granted by the Federal Energy Regulatory Commission (FERC).

First production was achieved at Venture Global’s Plaquemines plant, also in the United States, at the start of December. The first shipment headed to Germany’s EnBW onboard LNG carrier Venture Global Bayou less than two weeks later.

Reclaim Finance warns that the emissions from these projects will breach net zero goals. The authors have urged banks and investors to adopt comprehensive policies to stop providing financial support to the developers of all new LNG projects and to primarily stop financing export terminals.

Additionally, they believe support for import terminals should also be phased out due to their potential to become stranded assets and the hindrance they present to the energy transition.