Sunday, December 10, 2023

Oil and gas firms face mounting financing challenges amid rising environmental concerns

Reading Time: 2 minutes
Journalist IBP


Mahinda Arkyasa



Concerns about the environmental impact of fossil fuels continues grow, oil and gas companies are encountering increasing difficulties in securing financing for their projects. Executives in the oil and gas industry have emphasized the need for these firms to demonstrate a more environmentally friendly energy agenda.

Alwyn Bowden, CEO of Pengerang Energy Complex Malaysia, acknowledged that even though the oil and gas sector remains profitable, obtaining funding has become more challenging. “From the perspective of many lenders, including the word ‘refinery’ in your title means you won’t get financing,” Bowden stated during the Asian Downstream Summit in Singapore.

With the mounting global threat of climate change and the world’s efforts to move toward net-zero emissions, Bowden’s comments underscore the industry’s growing struggle to secure funding.

Despite global crude oil demand reaching all-time highs this year, lenders have become more cautious about offering financial support. This situation has strained the global refining system, leading to increased bottlenecks and fluctuating prices.

The mismatch between sustainable oil and gas demand and the reluctance to invest in capacity or maintain existing facilities has fueled global tensions in recent years. When fuel prices surged last year, senior Saudi Arabian oil officials blamed refining crises rather than crude oil shortages.

“Now refinery owners need to show that their businesses are in the process of transitioning toward net-zero emissions targets,” Bowden emphasized.

“For upcoming refineries, these efforts involve plans to use factory waste products as fuel and deliver electricity to several operations,” Bowden added.

Maria Katryn, Senior Financing Manager at PT Kilang Pertamina Internasional, noted that Pertamina has been able to secure funding by pursuing environmentally related projects, even though it has not completely succeeded in reducing emissions.

“Banks have imposed more restrictions on oil and gas financing, expecting the world to reduce its reliance on oil and gas,” said Roger Charles, Executive Director of Sustainability at DBS Bank Ltd. “A realistic narrative for energy transition plans is key to accessing funding,” he added.

However, launching a sustainable business also comes with its own set of challenges. “There are many examples of greenwashing, where people—due to various pressures—are forced to do something they cannot achieve,” said Mayank Vishnoi, Chief Financial Officer of ChemOne Group.

Journalist IBP


Mahinda Arkyasa




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