Amid Carbon Emission Controversy
The Export-Import Bank of Korea (Korea Eximbank) has put on hold its decision to provide financial support for the Australian Barossa-Caldita gas field project promoted by SK E&S. The gas field is embroidered in controversy, as environmental groups at home and abroad assert that the project will generate excessive carbon dioxide emissions compared with other gas fields in Australia.
The bank withheld its earlier at a Credit Review Committee meeting held on March 31. On the day, the bank was expected to approve a plan to provide a total of US$313 million, including US$107 million in project financing and US$106 million in overseas business finance guarantee, for the project. Korea Trade Insurance Corp., which previously promised public financial support for the gas field project together with Korea Eximbank, has already approved financial support for the project.
“We will decide on financial support for the project after comprehensively studying carbon emission reduction efforts by the project promoters,” a bank official said.
The bank's decision came following a lawsuit filed by Aboriginal Australians against it. Recently, residents of Tiwi Island in northern Australia and the Larrakia tribe filed an injunction with the Seoul Central District Court to suspend the two Korean financial institutions' loans to the Barossa project. They asserted that the gas pipeline plan will threaten their livelihood.
Separately, the delay decision seems to have been affected by the fact that Korea Eximbank took on the risk of stranded assets after providing financial support for a fossil fuel project, which came to light in an audit by the Board of Audit and Inspection. Korea Eximbank provided a loan of about 220 billion won to a US shale gas company’s oil and gas field project in 2016, but it was amortized in December 2020 because the loan could not be repaid. The Board of Audit and Inspection pointed out that Korea Eximbank’s gave the loan without taking into account the risk of insolvency, resulting in large loss.
The fact that the business plan for Barossa Gas Field has not yet completed is also cited as one of the reasons why the decision was put off. Companies participating in Barossa Gas Field plan to finalize a business plan in the near future for the installation of a new pipeline connecting Barossa Gas Field and a liquefied natural gas (LNG) processing facility.
Meanwhile, SK E&S plans to import 1.3 million tons of liquefied natural gas annually beginning from 2025 through the Barossa Gas Field Project. Environmental groups are arguing that the gas field should be shut down because it emits more carbon than any other gas fields in Australia. On the other hand, SK E&S is sticking to its position that it can import gas by sufficiently slashing carbon emissions through carbon capture and storage.