Oil refiners struggle for financing as banks shun fossil fuels

SINGAPORE – Oil refiners are finding it harder to secure funding for projects as more banks shy away from fossil fuel financing, with plant owners now pressed to show that their businesses have cleaner-energy goals, executives said.

While the business is still profitable, getting financing is more challenging, according to Mr Alwyn Bowden, chief executive officer of Malaysia’s Pengerang Energy Complex.

From the point of view of many lenders, “if you have the word ‘refinery’ anywhere in your title, you’re not going to get finance”, Mr Bowden told the Asian Downstream Summit.

The summit was held at the Sands Expo and Convention Centre on Wednesday and Thursday.

With the threat from climate change growing and the world trying to move towards net-zero emissions goals, Mr Bowden’s comments highlight a growing struggle for the industry.

Despite worldwide crude demand hitting an all-time high in 2023, lenders have become more wary of offering funding.

That has left the global refining system stretched, raising the risk of bottlenecks and volatile prices.

The apparent mismatch between sustained hydrocarbon demand and a reluctance to invest in capacity or keep plants open has spurred global tensions in recent years.

When fuel costs spiked in 2022, Saudi Arabia’s top oil official laid the blame on a refining crunch and not on any shortage of crude.

Now, plant owners will need to show that their business is in the process of transitioning to net-zero carbon dioxide emissions, Mr Bowden added on Wednesday.

For Pengerang Energy’s upcoming refinery, that push includes plans to use the plant’s waste products as fuel, as well as electrifying some operations, he said.

Indonesia’s state-owned Pertamina has been able to attain financing, according to Ms Maria Katryn, senior financing manager at Kilang Pertamina. The company has environmental projects but has yet to fully curb emissions, she said. 

Banks have placed more restrictions on financing oil and gas, with the expectation that the world will soon need less of them, said Mr Roger Charles, executive director of sustainability at DBS Bank.

A realistic narrative for energy-transition plans is key to accessing financing, he added. 

Even then, pitching sustainable businesses comes with its pitfalls.

“There are a lot of examples of greenwashing, where people – due to various pressures – get forced to commit to something which they cannot,” said Mr Mayank Vishnoi, chief financial officer of ChemOne Group. BLOOMBERG