Are Nordic Banks Facilitating a ‘CO2 Emissions Factory’ in Australia?

    Stockholm (NordSIP) – According to a recent report by the Institute for Energy Economics and Financial Analysis (IEEFA), a range of Nordic investors might be exposed to severe climate change risk through BW Offshore and its involvement in Santos’ Barossa LNG project near Darwin, Australia.

    Santos is a leading Australian supplier of natural gas. BW Offshore is a Norwegian operator of floating production storage and offloading (FPSO) vessels, whom Santos awarded a contract for a FPSO facility to develop the Barossa LNG reservoir. The IEEFA is a U.S. non-profit focused on examining issues related to energy markets, trends, and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. IEEFA receives its funding from global philanthropic organizations and individuals. It is funded by the Rockefeller Family Fund, The Heinz Endowments and the Sequoia Climate Fund, among others.

    A CO2 Emissions Factory

    “Barossa gas has 3 times the CO2 content that the Darwin LNG plant facility can handle,” says the IEEFA’s report author and LNG industry expert John Robert. “When the venting and combustion emissions both off- and on-shore are calculated, the Barossa to Darwin LNG project looks more like a CO2 emissions factory with an LNG by-product,” he warns.

    “The unprecedented scale of the Barossa emissions relative to the LNG production creates major risks for shareholders,” Robert notes. “Fields like Barossa are very problematic because they contain such high emitting gas that they can never be made into acceptable LNG in the very competitive market which now is more aware of the climate impact of its product.”

    “This is a big and real risk to proponents like Santos, SK E&S and its partners in the Barossa field and Darwin LNG plant – a plant which will most likely become a stranded asset if Barossa doesn’t go ahead. But with even more money lost if the Barossa FID is approved, investors should be particularly wary,” Robert explains.

    The Nordic Angle

    The problem for Nordic investors stems from their exposure to the project via BW Offshore and the recent contract it won from Santos. “This contract highlights an additional, significant liability risk being worn by company shareholders in both Santos and BW Offshore.”

    Many of the region’s environmentally aware financial institutions have business dealings with BW Offshore because it is a Norwegian company. While Nordea, SEB and Nordnet Bank are mentioned among the largest shareholders, they are mere Nominee shareholders, meaning that they are holding the shares on behalf of other beneficiaries. Folketrygdefondet and DNB Markets Aksjehandel/-analyse are Ordinary shareholders of BW Offshore, which means they hold the securities in their funds.

    Janicke Scheele, Head of Responsible Investments at DNB Asset Management AS, confirmed the Norwegian asset manager’s involvement in BW offshore. “It is correct that some of our Norwegian equity mutual funds are invested in BW Offshore Ltd.” We could not obtain comments from Folketrygdefondet.

    “We have engaged with BW Offshore Ltd since 2019 on several topics including climate issues. On the climate side, for the company to reach our engagement goal, we would like BW Offshore to demonstrate best practice related to climate issues (governance, strategy, risk management, targets, and reporting – TCFD aligned). We notice a clear improvement from the company lately, also evident in their latest sustainability report and also in their annual report,” Scheele adds.

    “The Barossa contract is very recent for BW Offshore, and we are still trying to figure out the facts and implications for the company’s climate-related path and ambitions. We will continue to engage the company regarding this important development, and have scheduled a meeting to take place early next week,” Scheele concludes.

    Image © BW Offshore

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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