A Huge New Oil Refinery in Oman is About to Get a Big Loan with Help From the UK Government

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A UK government agency plans to support the development of a โ€œhigh riskโ€ multi-billion pound oil refinery in Oman by opening a line of credit to boost Britishย exports.

The Duqm oil refinery is a $7bn (ยฃ5bn) joint venture between Oman Oil Company (OOC) and Kuwait Petroleum International (KPI) which will produce 230,000 barrels of oil per day once it becomes fully operational inย 2021.

Stefano Gelmini, spokesman for Greenpeace UK, said ministers would beย โ€œthe merchant bankers of the global fossil fuel industryโ€ if support for the project goesย ahead.

The governmentโ€™s credit agency, UK Export Finance (UKEF), which underwrites loan guarantees to UK companies to help them export their goods and services abroad, said it was working with the Duqm Refinery company and its contractors to finance the design and build of the refinery.

The government is showcasingย the project as a โ€œstrong opportunityโ€ for UK companies to bid for contracts in the supply chain despite the UKEF acknowledging the refinery could have โ€œsignificant adverse environmental, social and human rights risks and/or impactsโ€.ย ย 

The plan was announced weeks after Theresa May claimed the UK was a global climate leader. In a major speech launching the governmentโ€™s 25-year environment plan, she claimed the UK will โ€œcontinue to lead the world in delivering on our commitments to theย planetโ€.

David Powell, environment lead for the think tank New Economics Foundation, denounced the inconsistency between the governmentโ€™s global climate commitments and its underwriting of finance for dirty energy projectsย abroad.

โ€œCognitive dissonance is at the heart of how the UK thinks about climate change,โ€ he told DeSmog UK.

Andrew Scott, senior research fellow at the Overseas Development Institute (ODI), said the UKEFโ€™s potential new line of credit to the refinery would โ€œeffectively be a form of subsidyโ€ to the fossil fuelย industry.

Environmentalists have repeatedly highlighted UKEFโ€™s continued use of public finance to boost support for fossil fuel projects abroad.

Gelmini said the UK government had handed out nearly ยฃ5bn in export subsidies to the fossil fuel industry since 2010 โ€œdespite a clear pledge to champion clean energyย exportsโ€.

A previous DeSmog UK analysis revealed the UK government gave a total of ยฃ427 million in support to overseas fossil fuel projects through UKEF inย 2015-16.

In November, the UK government denied a $2bn (ยฃ1.52bn) UKEF loan guarantee to Saudi Arabiaโ€™s national oil company Saudi Aramco, which isย one of the worldโ€™s largest oil producers, was linked to the companyโ€™s mooted IPO float. Saudi Aramco is said to be considering either London, New York or Hong Kong for what would be the largest ever publicย listing.ย 

Multi-billion pound fossil fuelย project

Occupying a 900-hectare site in central eastern Oman, the Duqm refinery is located in a new industrial zone with investments of up to $15bn (ยฃ10.78bn) earmarked for petrochemicals and infrastructure development over the next 15 years.ย ย ย 

Alongside the oil refinery, the project also includes an 80 kilometre crude oil pipeline connecting an oil storage site at Raz Markaz, south of Duqm, and a product export terminalย port.

Image Credit: Artist impressions of Duqm Port. Creative Commons/CC BYSAย 4.0

The infrastructure will lock Oman into decades of burning and exporting fossil fuels and โ€œcontribute towards global warmingโ€, as acknowledged in the appendix of the projectโ€™s environmental and social impact assessment.

Although the operating company recognised its responsibility for emissions arising from the projectโ€™s operation during its 30-year life span, it said the consumer was โ€œultimately responsible for the consumption of fossil fuelsโ€ and any resultingย emissions.

According to Powell,ย the UK government previously argued that if British companies did not bid for these contracts, less transparent and accountable companies in China, for example, would pick up theย work.

But Powell added that faced with the โ€œscale and speed with which we need to tackle climate changeโ€ the UK had to move away from fossil fuel and this argument did not standย up.

Governmentย inconsistency

Advocating a โ€œmanaged declineโ€ of existing support for the fossil fuel industry and its supply chain, Powell accused UKEF of running instead โ€œa managed expansionโ€ plan for theย sector.

He warned the โ€œfast pace of decarbonisationโ€ meant the parts of the UK manufacturing sector supporting the fossil fuel industry risked being left behind โ€œand without workโ€ if the government continued to support its strategy throughย exports.

He added the UKโ€™s industrial strategy had to be driven by the governmentโ€™s pledge under the Paris Agreement to move away from fossil fuels and strive to limit global temperature rise โ€œwell below twoย degreesโ€.

His comments were echoed by Gelmini, from Greenpeace UK. โ€œIt’s high time different government departments sat down together and worked out a joined-up approach,โ€ he said, adding championing clean technologies would provide โ€œjobs and trade opportunities forย Britainโ€.

UKEF said it is actively seeking to support renewable energy projects but that it has to respond to the demand of exportingย companies.

In a statement, a UKEF spokeswoman said the credit agency was unable to comment on ongoing considerations over the Duqm refinery citing commercial confidentialityย reasons.

She said: โ€œThe UKโ€™s priority, at home and abroad, is to encourage international opportunities for UK businesses โ€“ ensuring they can build fruitful relationships with overseas partners. The UKEF supports exports in all sectors, supporting the UK economy andย jobs.โ€

But ODIโ€™s Scottย told DeSmog UK that fewer renewable companies were benefiting from UKEF support โ€œbecause the UK government is not encouraging clean energy as an export sector but is instead promoting fossil fuelย exportsโ€.

He added domestic support for the renewable sector had been inconsistent with fluctuating subsidies.ย ย 

โ€œThe renewable sector has not developed as much as it might have with more consistent support โ€” if it had, the sector might be in a better position to export,โ€ heย said.

Image Credit: Peter Dowley/Flickr/CC BYย 2.0. Updated: 12/02/2018: The headline was changed to say ‘with help from’ rather than ‘through’ the UK government.

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