EBRD has no plan to fully ban gas investment soon

The European Bank for Reconstruction and Development (EBRD) has no plan to completely ban gas investments in the near future, its chief economist, Beata Javorcik, told Argus.

"We do not finance upstream gas, in rare and exceptional cases we will finance selective downstream and midstream natural gas projects," Javorcik said on the sidelines of the Financial Times Global Commodities Summit in Lausanne. For projects to receive support from the bank it is necessary to demonstrate "strong ambition to accelerate the low-carbon transition" in the economies where EBRD operates, particularly in those that rely heavily on fossil fuels and coal for electricity and heating, Javorcik said.

Certain gas projects can help to bring about a faster decline in Europe's CO2 emissions and ensure energy security while accelerating the deployment of renewables, Javorcik said.

In many countries where the EBRD operates "the usage of energy per capita in residential heating and residential appliances is lower than in advanced Europe", but CO2 emissions per capita are roughly equal to or higher than in western Europe, according to the bank. "So, in other words, energy sources in our countries of operations are more intensive in emissions which makes their decarbonisation more challenging and it is why in some cases selective gas projects can support acceleration of the energy transition," Javorcik said.

Europe is "well positioned in terms of gas supply" for the next year thanks to the historically high storage inventories at the end of gas winter as well as the prolonged decline of gas use, Javorcik said.

"The good news is that prices of LNG in Europe are back to the average level of 2017-21. The bad news is that prices of natural gas in Europe are about four times as high as natural gas in the US," Javorcik said, stressing that it reduces "European competitiveness". Industrial exports from western Europe, in particular Germany, may also remain relatively low in the coming year, which will influence gas demand in the region. "In turn, less positive growth in western Europe translates into lower demand for imports from emerging Europe."

"There is also a risk if Donald Trump becomes the new president, the US will impose a 10pc tariff on European exports as has been promised by Trump," Javorcik said.

UK bank Barclays has decided not to provide project or other direct finance for existing clients' upstream oil and gas expansions. The bank also said that it would no longer finance new energy clients if more than 10pc of their planned oil and gas capital expenditure is in expansion.

Other banks, including HSBC, BNP Paribas and Societe Generale, have promised to stop or limit new oil and gas financing.

By Alexandra Vladimirova