Today’s Key Takeaways: Nome’s deep water port project receives $250 million from infrastructure act. Alaska oil production increased 2% in FY 21. Loss of nuclear in Europe makes AKLNG more competitive. Ucore actively pursuing Ketchikan project. Insurers touting net zero goals also financing Brazil’s oil growth.
NEWS OF THE DAY:
A key Arctic Alaska port expansion gets $250 million in federal funding
Melody Schreiber, Arctic Today, January 20, 2022
The project to expand and deepen a key port in Arctic Alaska will get a $250 million boost in federal funding from recently passed U.S. infrastructure legislation, officials announced Wednesday.
The Infrastructure Investment and Jobs Act, which passed in November 2021, will now include funding for four additional projects in Alaska, including the port in Nome.
“Being able to build out this expansion — to really be able to classify Nome as a deep-water port — is incredibly significant,” Senator Lisa Murkowski, a Republican from Alaska, told Arctic Today.
“For years now, we’ve been looking for a couple million dollars here and a few million dollars there,” Murkowski said. “$250 million is real. Real dollars.”
Additional funding may also come from private partners.
The expanded Nome port would serve as the only deep-draft port in the U.S. Arctic region (although it’s slightly south of the Arctic Circle, Nome is far closer to the Bering Strait and Arctic Ocean that the next closest deep-water port, in Dutch Harbor, which is about 1,000 miles south of the Arctic Circle).
“When you have an almost thousand-mile difference between your port, and you’re trying to cover an area of the globe that is seeing a stepped-up level of activity that could only be imagined some years ago — there’s got to be a recognition that we have a level of infrastructure that is keeping up,” Murkowski said. “There is definitely a much, much stronger commitment that is being evidenced by the United States in the Arctic, and this port in Nome is going to be a key part of that.”
The Nome port expansion has been years in the making.
The 2018 Water Resources Development Act revived the prospect of port expansion, which had previously been considered and then put on hold. The 2018 legislation called for a feasibility report on the upgrades, and the ensuing study recommended a depth of 40 feet, and following reports added protections for marine animals.
In May 2020, the plan to expand the port won approval from the U.S. Army Corps of Engineers.
Legislation in December 2020 authorized, but did not fund, a deep-draft expansion of the port in Nome. The Water Resources Development Act of 2020 allowed the port to move forward with design plans and to approach other partners for possible funding.
Demand for an expanded port has grown as climate change makes the region more accessible for tourists, researchers, shippers, resource extractors, and security forces.
Right now, U.S. Coast Guard icebreakers, also known as polar security cutters, are unable to dock in the U.S. Arctic, instead making lengthy resupply trips to Dutch Harbor while on Arctic missions.
“Whether this is the ability to bring in a polar security cutter, whether it’s a place to have vessels that can help assist in in search and rescue, whether it is the economic base for transfer of commercial goods coming into the Arctic area — there is so much that we will gain by this port expansion,” Murkowski said.
The community of Nome will also benefit from the increased traffic headed for Arctic waters, and could become a northern shipping hub, Murkowski said.
The Alaska senator has frequently called for a system of Arctic ports, not just one. Port Clarence or Kotzebue could also host new deep-water ports, she said. “These are coastal regions that right now are severely, severely limited in their marine infrastructure.”
The Nome port announcement follows news on January 13 that $25 million of the infrastructure funding will be used to restore the main road in Denali National Park, which partially closed by a landslide last summer. Such slides are a growing concern as permafrost in the Arctic and sub-Arctic thaws. The infrastructure legislation will also include $88 million for dam project in the Interior Alaska community of North Pole, outside Fairbanks.
OIL:
Alaska oil production rose in 2021 after Covid-related slowdown
Linda F. Hersey, Fairbanks Daily News Miner, January 20, 2022
Oil exploration and drilling are likely to increase on state-owned land in Alaska as the industry faces restrictions from the Biden administration on federal land.
Corri Feige, commissioner of the Department of Natural Resources, offered that assessment as part of an oil production update and forecast for the Senate Finance Committee meeting Wednesday in Juneau.
“There are expanded lease positions extending beyond developed fields,” Feige told lawmakers.
In 2021, the oil sector rebounded from price and demand speculations, Feige said. This year, oil prices are higher but more stable.
She cautioned that there are uncertainties around oil activities. “Increased demand is good for Alaska’s oil industry. But there are significant headwinds,” Feige said. “There is pressure on oil companies for increased profits for shareholders. Operators are taking full advantage of the price rise for more efficiencies and production.”
Oil production increased by 2% in Alaska in fiscal 2021 over the previous fiscal year. But it was still lower than production levels pre-pandemic.
Pascal Umekwe, a petroleum engineer, led lawmakers through an explanation of oil production activities in Alaska and expectations for the future.
He cautioned there are factors influencing oil and gas production trends in Alaska and the U.S., including the “strong environment for social and environmental issues.”
“There is new terrain for capital allocation decisions in the Arctic, especially for early-stage oil project development and evaluation,” he said.
The Covid pandemic put a damper on field management and redevelopment efforts, he said. Now activities are returning.
Umekwe told lawmakers that the state talks with operators to learn about their activities and plans in order to put together projections.
Umekwe said that the state forecasts tend to reflect actual oil production figures. He noted that oil production in fiscal 2021 was 5% higher than state projections, saying that the forecasts are “good guidance.”
Sen. Bert Stedman, the committee chair, said that Hilcorp represents a new firm operating in Prudhoe Bay and that the company is doing work to enhance production. “There is a lot of oil left in Prudhoe,” Stedman said.
“As BP said to us, ‘We know where the oil is. It is in Prudhoe Bay. Why should we drill anywhere else?’” Stedman said.
Umekwe said that Hilcorp has focused on facilities and is now shifting toward exploration and drilling. There are nine processing facilities in Alaska, with six at Prudhoe Bay and three at Alpine. All are operational. Today’s production is at 500,000 barrels per day.
Several projects also are in various stages of development, including the so-called Willow project, which has been tied up in a court challenge by environmentalists trying to stop the project.
“A court decision has taken the operator back to the drawing board on what issues need to be resolved for that development,” Umekwe said.
The expectation is for construction to start in the first quarter of 2023, with the peak rate of production predicted to be 130,000 barrels per day.
Stedman reminded DNR officials that companies can apply for royalty relief, which is a long-standing option.
Sen. Bill Wielechowski, an Anchorage Democrat, asked if there are any leases on the North Slope that are “reasonably profitable but not in production.”
Stedman added: “Is anything being left on the table?”
Feige said there are a number of leases held by operators who have not commenced exploration. “To get from leasing to first exploration, it takes about seven years on average, leading to discovery or condemnation,” Feige said.
“We have mechanisms to move companies forward. We do not believe there are any companies warehousing acreage at this time,” she said.
There is pressure on operators to do seismic testing, drill holes and “help us understand productivity that leads to discovery,” Feige said.
Outlook from the Department of Revenue
The Department of Revenue released the following statement and outlook on state oil revenues:
“The Department of Revenue currently develops a monthly revenue outlook for the current and next fiscal year (for fiscal years 2022 and 2023), that is used internally to review actual revenue for the current fiscal year and to update our estimated revenue based on the most recent information.
“While this update does not incorporate the level of rigor and detail that we put into the official spring and fall revenue forecasts, it does give an indication of how revenues are expected to perform based on the most currently available information.”
FY2022 Fall Forecast – Estimated Revenues (12/15/2021): $2,662.6 million ($5,731.9 including POMV)
FY2022 Revenue Forecast at Current Futures Outlook (1/13/2022 closing prices): $2,943.8 million ($6,013.1 including POMV)
Difference: $281.1 million above fall forecast
FY2023 Fall Forecast – Estimated Revenues (12/15/2021): $2,577.1 million ($5,937.7 including POMV)
FY2023 Revenue Forecast at Current Futures Outlook (1/13/2022 closing prices): $3,043.7 million ($6,404.3 including POMV)
Difference: $466.6 million above fall forecast
GAS:
Loss for nuclear power is a win for LNG traders with spare to sell
Larry Persily, Alaska Journal of Commerce, January 19, 2022
Much of Europe wants to go green in the years ahead, setting goals for net-zero emissions and turning away from fossil fuels for power generation.
But much of Europe also wants to turn off its nuclear power plants.
The paths are likely to intersect, creating the risk of a power crunch and higher tolls for electricity users in the near term.
Natural gas is a popular alternative power plant fuel until renewable energies can meet demand, but there’s not enough of it to go around this winter. Producers and liquefied natural gas traders with cargoes to sell — those uncommitted to long-term, lower price contracts and available to the highest bidder — are enjoying a lucrative winter.
A decrease in nuclear power at the same time as the shortage of natural gas is making winter painfully expensive for Europe, where spot-market rates for liquefied natural gas have bounced off the walls of traditional price ranges to fetch between $30 and as much as $50 per million Btu.
That’s more than 10 times what the same methane molecules cost in the United States this month, allowing more than enough to cover liquefaction and transportation fees across the ocean plus a hefty profit. Spot prices in Europe have been so high in recent weeks that traders have taken advantage of the opportunity to divert some cargoes already on the way to Asia, instead sending them across the Atlantic.
At even half the lowest of this winter’s spot-market price range in Europe, new LNG export projects, such as the state-backed Alaska LNG proposal to market North Slope gas, would be extremely profitable. But only if they could count on high prices lasting long enough to pay off the mortgage, which is doubtful as supply and demand will come back into balance as happens in commodity market cycles.
Besides, project developers and investors probably could not afford nor want to take the risk of relying on the uncertainty of spot sales, rather than the traditional financing model of locking in sales under long-term, less-price-volatile contracts.
The Alaska Gasline Development Corp. continues working to market its $38 billion project, as are a couple dozen other ventures on the U.S. Gulf Coast, Canada’s East, and West coasts, in Africa, Australia, Qatar and Russia. Regardless of the anomaly of this winter’s record spot prices in Europe, and Asia, the lowest-cost LNG projects are the ones signing up new customers, continuing to leave higher-cost projects at a competitive disadvantage.
Meanwhile, many officials in Europe are reminding the public that until renewable power sources pick up more of the load, the continent will need nuclear power to keep the lights on as countries reduce their use of coal, oil, and natural gas to bring greenhouse gas emissions to target levels.
The U.K. and Germany, however, are shutting down their nuclear power stations; though France, which gets about 70% of its electricity from nuclear, is heading in the opposite direction with plans to build additional plants.
Germany plans to shut off all of its nuclear power plants by the end of this year, increasing its reliance on coal-fired plants and other power sources. On Dec. 31, it shut down three of the six nuclear plants still in operation.
Germany’s decision to phase out nuclear while shifting from fossil fuels to renewables dates back to 2002, with a couple of shifts along the way.
The new center-left government that took control last month plans to phase out coal “ideally” by 2030, filling the gap with less-polluting gas until enough renewable energy is available to meet the demands of Europe’s biggest economy.
But efforts to build LNG import terminals in Germany have been delayed by market uncertainty on how the country will proceed between meeting emissions targets and countering rising energy costs. Developers shy away from uncertainty.
Germany’s new climate minister told reporters on Jan. 11 that the country faces a “gigantic” task if it wants to achieve its goals for reducing greenhouse gas emissions while ensuring sufficient power for its energy-hungry industries.
Germany currently gets 43% of its power from renewables, such as solar and wind power, but needs to almost double that number to meet emissions targets in 2030, Robert Habeck, a member of the Greens party, told reporters Jan. 11.
The task will get even harder if electricity consumption increases significantly as people switch to electric cars and install electric-powered heat pumps to warm their homes, he said.
Not everyone in Germany supports the complete shutdown of nuclear power, with advocates arguing that the power plants can help Germany meet its climate targets for reducing greenhouse gas emissions.
The European Union’s internal market chief, French commissioner Thierry Breton, also has spoken in support of nuclear power — combined with investment in renewable sources — as crucial for meeting the EU’s objective of net-zero emissions by 2050.
However, it will require more than $50 billion invested in nuclear by the end of the decade, and maybe 10 times that much by 2050, Breton was quoted in an interview with France’s weekly Journal Du Dimanche.
“To reach carbon neutrality, it will really be necessary to change up a gear in the production of carbon-free electricity in Europe,” Breton said.
And while the country remains heavily invested in nuclear power, a French company, Electricite de France, last year decided to shut down its Dungeness nuclear power station in the U.K., seven years sooner than planned. The two 40-year-old reactors had been offline for about three years due to “significant” technical challenges.
The shutdown means five of the U.K.’s eight nuclear plants will be closed down permanently by 2024.
The closures further crimp electricity supplies in the middle of the broader energy challenges in Europe.
Britain can usually rely on electricity from France, but extended outages at nuclear plants in the neighbor across the channel are limiting supplies this winter.
Elsewhere in Europe, Austria also opposes nuclear power, while the Czech Republic and Finland, along with France, see nuclear as crucial to phasing out carbon dioxide-emitting coal-fueled power plants.
MINING:
Ucore Recaps 2021 Rare Earth Supply Chain Groundwork Accomplishments Outlines Direction for 2022
Mining.Com, January 20, 2022
Ucore Rare Metals Inc. (TSXV: UCU) (OTCQX: UURAF) (“Ucore” or the “Company”) is pleased to provide the following overview of its 2021 North American rare earth element (“REE“) supply chain groundwork activities, accomplishments and continuing planned direction for 2022.
“Ucore has a very definitive vision and plan for an independent and comprehensive North American rare earth element supply chain,” statedPat Ryan, P.Eng., Ucore Chairman and CEO. “To accomplish this, the fundamental component is the ability to have, first and foremost, operating commercial-scale rare earth separation plants. The ability to separate rare earth elements into oxides does not exist in North America today and is, therefore, the central objective of Ucore.”
“This advancing capacity plan will then support the various downstream relationships that have been cultivated over this past year with prospective offtake OEMs and emerging ex-China metal, alloy, and magnet producers.”
With this primary purpose (as also outlined in Ucore’s 12 May 2021 news release), the Ucore Team aggressively progressed its corporate goals towards establishing this supply chain groundwork (see Figure 1) comprised of four all-important business objectives, namely:
A. Commercializing Innovation Metal Corp.’s (“IMC“) RapidSX™ technology for commercial deployment into the Company’s planned SMCs. Conducting Alaska SMC financing, engineering, permitting and community/stakeholder engagement activities for the near-term implementation of critical midstream processing of REOs as outlined in its ALASKA2023 plan and the Company’s broader international ambitions:
1) Continuing financial and strategic support to IMC for their commercial development of the RapidSX™ technology platform as outlined in Ucore’s 29 December 2021 news release and summarized as follows:
a) Independent third-party expert evaluation testing of RapidSX™ technology is complete, and the independent report describing the findings is expected in January 2022.
b) RapidSX™ hardware design and the commercial demonstration plant engineering layout are complete.
c) Procurement of components and construction of the commercial demonstration plant (“Demo Plant“) are well underway.
d) The current target for the Demo Plant completion is the end of Q1-2022, with commissioning and operation during an initial test campaign to commence shortly after that.
e) IMC is performing early-stage RapidSX™ integration engineering for the Alaska SMC Project:
i) Including the inclusion of prospective Alaska SMC mixed REE chemical concentrate (“MREC”) feedstocks into the planned Demo Plant testing schedule.
2) Continuing the development of the Alaska SMC Project, including but not limited to:
a) Financing Initiatives:
i) Establishing a Memorandum of Agreement (“MOA“) with Alaska’s Southeast Conference (“SEC“) to establish a joint enterprise (known as the Natural Resource Development Complex (“NRDC“)) facility in Ketchikan, Alaska, to house Ucore’s Alaska SMC plant under a long-term lease arrangement:
(1) Up to 80% of the initial development funds for this facility (i.e., land and building) may be available through access to SEC’s existing state and federal grant economic development funding programs.
ii) Completing a 2021 Alaska Industrial Development and Export Authority (“AIDEA“) due diligence process and continuing towards approval of a $3.5M financing package – expected in Q1-2022. Including stakeholder engagement and community consultation with:
(1) Ketchikan Gateway Borough
(2) Southeast Conference
(3) Alaska Senator Burt Stedman
(4) Alaska Representative Dan Ortiz
iii) A May 2021 pre-application meeting with the Department of Energy’s (“DOE“) Loan Programs Office (“LPO“) Advanced Technology Vehicles Manufacturing Loan Program with formal submission of application expected in H1-2022.
iv) Continuing to work with J.A. Green & Company and the Alaska federal congressional delegation on various US government critical metals development opportunities.
b) Engineering Initiatives:
i) In 2021 Ucore continued its ongoing engagement with Mech-Chem Associates, Inc. to commence the specific engineering requirements for the Alaska SMC in conjunction with IMC’s engineering personnel. This work will continue throughout 2022 and will ultimately conclude with the development of a contract design package suitable to execute a design/build construction contract.
c) Permitting Initiatives:
i) The retention of a permitting consultant in September 2021 to develop an initial permitting scope for the Alaska SMC.
d) Community/Stakeholder Engagement Initiatives:
i) A September 2021 partnering with the University of Alaska Fairbanks (“UAF“) and the Alaska Department of Natural Resources Division of Geological & Geophysical Surveys (“DGGS“) to join their recently awarded DOE project and efforts towards Bringing Alaska’s Carbon Ore, Rare Earth, and Critical Minerals Potential into Perspective.
ii) October 2021 discussions with the University of Alaska Southeast campuses regarding the potential development of a specific workforce development training curriculum to support Ucore’s employment needs in Ketchikan, Alaska. Further discussions are scheduled for March 2022.
iii) Various consultations throughout 2021 with the Ketchikan Gateway Borough Mayor, Manager, Planner, and certain Assembly members with planned continued interaction as engineering and planning efforts materialize.
3) Exploring the potential of developing an SMC in Canada:
a) November 2021 and January 2022 meetings with the Canadian government to examine the expansion of the SMC concept into Canada. Further discussions are planned as Ucore envisions a greater need for REO production in North America.
B. Identifying and securing multiple upstream sources of US-allied chemical concentrate feedstocks (both light REE (“LREE“) and heavy REE (“HREE“)) to provide inputs for processing at the Alaska SMC and other potential SMCs:
1) Pursuing relationships and agreements with existing and/or near-term producers of MRECs, consisting of:
a) Executing a Memorandum of Understanding (“MOU“) with Vital Metals in October 2021 for the supply of MREC, including product testing in December 2021 & January 2022. A definitive agreement is expected to be agreed upon in H1-2022.
b) Engaging in active discussions with several other sources of feedstocks; conversations are at various stages from early-stage to executed non-binding letters of intent (“LOI“) and/or MOUs.
C. Developing downstream customers, including those in the emerging North American automotive electric vehicle market, that have defined REO specifications with pre-defined quantities to support targeted production plans. Together with Ucore’s cultivation of relationships with emerging rare earth metal/alloy suppliers outside of China necessary to support permanent magnet manufacturers.
1) Pre-purchase & supply agreements for Alaska SMC REO products:
a) Under a confidentiality agreement, a 2021 engagement with an international automotive OEM and their engineering consultant to conduct a due diligence review of the Alaska SMC development plan. The due diligence was successfully concluded, and discussions continue.
b) Engaging in active offtake (for REOs and/or metals/alloys) pre-purchase & supply agreement discussions with several international companies; conversations are at various stages from early-stage to executed non-binding LOIs and/or MOUs.
2) Expanding and cultivating the market for the “other” REOs:
a) A 2022 Company objective with UAF is to explore alternative uses for some of the “other” REOs (specifically lanthanum, cerium, and yttrium), which make up a significant percentage of worldwide MREC feedstocks.
3) Metals/Alloys and Magnet making initiatives with prospective partners:
a) A 2022 objective for the Company is to expand current relationships to explore North American metal/alloy and magnet-making opportunities with the offtake of REOs from Ucore SMCs – this is necessary to ensure a truly domestic rare earth supply chain.
D. Accelerating the development of the Bokan Project as a vital US supply chain component to provide a long-term secure source of HREEs; the most expensive and scarce inputs of the permanent magnet metals.
1) Continuing to progress the development of Bokan consisting of:
a) An April 2021 commencement of the mill flowsheet design development at SGS Canada Inc. (Lakefield) (“SGS“) to include the potential recovery of the co-products beryllium, zirconium, niobium, and hafnium along with an optimized REE recovery. This test work is approximately two-thirds complete and will ultimately lead to:
i) a finalized flow sheet design to allow the commencement of pilot-scale testing from Bokan mineralized material (obtained previously and in Summer 2022) to generate an optimized mineral concentrate;
ii) followed by the generation of an MREC for testing at IMC’s Commercialization and Development Facility (“CDF“) in Kingston, Ontario, Canada, as part of a planned pre-feasibility study (“PFS“) and/or feasibility study (“FS).
b) A Spring 2021 initiation of additional fieldwork exploration at Bokan to further upgrade the National Instrument 43-101 (“NI 43-101“) HREE mineral resource. The work is designed to convert a significant percentage of the currently ‘indicated’ resource to ‘measured.’ Secondly, the Company will obtain ≈50 tonnes of additional mineralized material to facilitate the above-noted testing at SGS.
i) In September 2021, Ucore and Aurora Geosciences conducted field mapping in preparation for the planned work.
ii) The State of Alaska issued a 5-year land use permit for the commercial moorage of a marine vessel in September 2021.
iii) The USFS issued a 1-year permit for the Surface Exploration Project Plan of Operations in November 2021, and the work is expected to commence in May 2022.
c) The retention of a permitting consultant in September 2021 to develop an updated scope of required permits for Bokan.
“There is currently no commercial rare earth element processing to oxides, no conversion of oxides to metals/alloys, and no fabrication of rare earth permanent magnets derived from neodymium [NdFeB magnets] in North America,” stated Mike Schrider, P.E., Ucore VP & COO. “Ucore is diligently racing to change this narrative and has been fortunate to collaborate with other potential partners with a similar vision of a post internal combustion engine world and the importance of the supply of these critical metals to this new EV economy.
“An independent North American rare earth element supply chain is essential to ensuring a robust economy founded on manufacturing. Ucore and its prospective Alaska SMC partners are determined to achieve this with the production of rare earth oxides in 2024 through the plan presented in this news release.“
POLITICS:
From the Washington Examiner, Daily on Energy:
ENERGY DIPLOMACY MODE: Europe’s extremely tight gas market is pushing the Biden administration into energy diplomacy mode, with EU allies staring down an even more dire supply situation due to a prospective Russian invasion of Ukraine.
President Joe Biden told reporters yesterday the United States could help the bloc through this period of volatile geopolitics and high and at times record prices, although he didn’t divulge just how.
“I think there’s ways in which we can be of some value added in terms of the price of gas — natural gas and the like — to take the burden off of European countries that are now totally dependent on Russia,” Biden said.
The EU gets around 40% of its gas from Russia. That level of reliance means Europe would likely see electricity rationing and rolling blackouts in the event of a complete cut-off of Russian gas, while even a partial disruption “could have sizeable impacts on prices and industrial production in Europe,” Citi analysts said this week.
Reuters also reported last week that State Department officials, including senior adviser for energy security Amos Hochstein, have approached and probed energy companies operating in the EU about what they plan to do if Russia invades Ukraine and gas supplies are cut off or severely restricted.
One source told the outlet the U.S. pledged “to have Europe’s back if there is an energy shortage due to conflict or sanctions” and said Hochstein has been talking with heavyweight firms in the liquified natural gas market and major LNG exporter Qatar “to see if they can help the United States.”
Market forces are already doing the work on their own. European gas prices have fallen this month, with futures contracts for February on the Dutch TTF trading for less than half of where they peaked in December.
Analysts with the Energi Danmark Group assessed in a market report yesterday, “Over the last couple of weeks, liquified natural gas supply to Europe has ramped up significantly with several big tankers now heading to Europe as it has turned more profitable for producers to sell their gas here.”
U.S. LNG operators have been a big part of that and have been projected to play an even bigger role throughout the year, with more export growth in store associated with Cheniere’s expanded liquefaction capabilities at its Sabine Pass facility.
Gas and geopolitics: With more specifics outstanding, it should be noted that the Biden administration’s decision last month to reject calls for a ban on fuel commodity exports — something a number of congressional Democrats asked Biden to do — suggested separately that it sees the benefits associated with exported oil and gas outweighing any that may come from keeping it at home.
The oil and gas industry has been scoring big with exports at current prices, but they’ve also made the case that U.S. product is a big help to friends who need fuel, perhaps a rare point of agreement between Biden and the industry.
“We have allies, geopolitical allies, who need energy right now, and we are energy secure in this country right now. We produce more than we consume,” Dave Callahan, president of the Marcellus Shale Coalition, told Jeremy last month. “Again, do we want to leave our friends out in the cold and in the dark? Do we want them to rely upon energy from OPEC energy from Russia?”
CLIMATE CHANGE:
Insurers with net-zero goals back Brazil oil growth
Corbin Hiar, CLIMATEWIRE, January 20, 2022
Two insurance companies that have vowed to accelerate the global transition to net-zero emissions are helping to underwrite an expansion of offshore oil and gas production in Brazil, according to documents obtained by an environmental coalition.
The French insurer Axa SA has backed performance bonds for the Brazilian producer Phoenix Óleo & Gás that it needs to obtain offshore leases, the Insure Our Future coalition revealed today in a report about the financial industry. Japanese underwriter Tokio Marine Holdings Inc. has provided essential general civil liability and transport coverage for the state-owned driller Petróleo Brasileiro SA.
Renaud Guidée, Axa’s chief risk officer, chairs the Net-Zero Insurance Alliance, a group of 16 insurers convened by the United Nations last July that have committed to decarbonizing their underwriting portfolios by 2050. Tokio Marine joined the European-dominated alliance yesterday.
“Insuring or financing the expansion of the fossil fuel industry anywhere — and especially in a place as important for global climate regulation and Indigenous Peoples as the Amazon biome — is a catastrophic choice that flies in the face of the latest climate science,” Pendle Marshall-Hallmark, a campaigner at Amazon Watch, said in a news release from Insure Our Future. “Insurers and financiers everywhere must exit Amazon oil and gas immediately.”
The International Energy Agency, an intergovernmental organization formed in 1974 to help coordinate the global response to oil disruptions, last May outlined a plan to avert the worst impacts of climate change in part by halting the approval of new oil and gas projects.
But in the next five years, Brazil and its national oil company, commonly known as Petrobras, are planning to increase production by at least 1.2 million barrels per day, according to IEA data.
Those efforts would likely be impossible without the support of Axa, Tokio Marine, and American insurers Chubb Ltd. and Liberty Mutual Insurance Co., the report said.
Chubb is the leading insurer of Petrobras, and Liberty Mutual has provided performance bonds to a subsidiary of BP PLC that is looking to drill for oil off the coast of Brazil, according to documents Brazilian reporters hired by Insure Our Future obtained via open records requests.
“Oil and gas projects would not take place — nor would resulting spills — if insurance companies, as society’s risk managers, refused to support fossil fuel extraction,” Insure Our Future said in the report, which would no longer be possible to produce due to regulatory changes Brazil’s insurance regulator made to limit public access to industry records. (The United States and most other countries don’t require fossil fuel companies to disclose their insurers.)
Tokio Marine, Chubb and Liberty Mutual did not respond to requests for comment.
Axa spokesperson Alexiana Cirier noted that the insurer last October adopted a policy against underwriting new oil and gas developments “unless they are carried out by companies with the most far-reaching and credible transition plans.”
That policy doesn’t yet apply to Phoenix, “but the situation will be reassessed at the end of the contract,” she said in an email.