UK government considers supporting £4bn oil refinery expansion days after bombshell climate change warning

The UK government has said it is planning to financially support the multi-million-pound expansion of an oil refinery in Bahrain, just days after scientists warned a global effort to move away from fuel fossils was vital to prevent climate catastrophe.

The state-run Bahrain Petroleum Company (Bapco) has sought international backing for upgrades to increase the output capacity of its processing plant in Sitra by more than a third to 360,000 barrels a day. The project is expected to cost well in excess of £3.8bn.

UK Export Finance (UKEF) – the government credit agency which underwrites loans and insurance for risky export deals as part of efforts to boost international trade – said it was considering financing the refinery expansion.

Agency advisers who conduct due diligence on deals have said the project could have “significant adverse” environmental or social impacts.

Climate campaigners said the UK’s proposed backing for the refinery suggested the latest alert about global warming “have fallen on deaf ears”.

It comes in the wake of a landmark report by the Intergovernmental Panel on Climate Change (IPCC), which warned humanity needed to make “unprecedented changes” to the way it eats, travels, and produces energy to avert environmental disaster.

Scientists said greenhouse gas emissions must be almost halved by 2030 to keep the increase in the Earth’s temperature below 1.5C and prevent the worst effects of global warming.

Ministers are expected to instruct the UK’s climate watchdog to investigative how to accelerate Britain’s progress towards a zero-carbon economy.

But environmental activists said it was “hypocrisy” for the government to announce action on emissions while helping to finance the fossil fuel industry.

“The UN’s warnings of the unfolding climate change disaster have fallen on deaf ears if, just 24 hours later, the UK government considers backing a huge oil project in Bahrain,” Oliver Hayes, climate change campaign officer at Friends of the Earth, told The Independent.

“Ministers must urgently switch gears and work towards a future fuelled by renewables rather than fossil fuels, both domestically and internationally.”

Adam McGibbon, a climate change activist at Global Witness, added: “As the world reels from the news that we have twelve years to prevent catastrophic climate breakdown, this announcement by the government is staggering.

“The UK claims to be a climate leader, but it continues to spend billions pumping fossil fuels out of the ground.

“Until the government commits to phase out its fossil fuel lending, its claims of climate leadership are laughable. The only way forward is to start winding down the financing for fossil fuel projects, immediately.”

UKEF said it did not comment on transactions still under consideration for commercial confidentiality reasons.

A government spokeswoman added: “The UK’s priority, at home and abroad, is to encourage international opportunities for UK businesses – ensuring they can build fruitful relationships with overseas partners.

“UK Export Finance is committed to high standards of environmental, social and human rights risk management, and rigorously follow the requirements of the OECD Common Approaches and Equator Principles, which set the framework for export credit agencies and international financial institutions in managing such risks.”

In April, Bahrain announced it had found an oil field containing up to 80 billion barrels of tight oil in the offshore Khaleej Al Bahrain basin​. The discovery was the largest in its history, dwarfing the kingdom’s current reserves.

More than than £2.2bn of Bapco’s expansion costs are expected to be backed by export credit agencies. According to Reuters, the company has also been in advanced talks with Italy, Spain and South Korea.

The UK government has provided fossil fuel companies with £6.9bn in financial support through export credit since 2000, a joint investigation by Unearthed and Private Eye revealed last year.

The vast majority – £4.8bn – was pledged after 2010 despite a government commitment to favour clean technologies.

Almost half of the money Britain spent on energy overseas between 2010 and 2014 went on fossil fuels, according to research published by the Overseas Development Institute in August 2017.

Little more than a fifth was spent on renewable energy sources in the same period.