Legal

Government sued over $1.15bn funding for Mozambique gas scheme

A legal challenge to the decision by the UK government to approve $1.15bn funding for a liquified natural gas (LNG) project in Mozambique began at the High Court in London today.

Opponents of funding for the Mozambique gas project outside the Royal Courts of Justice, 7 December 2021.
Photo: Friends of the Earth

The case, brought by the campaign group, Friends of the Earth, centres on whether the project would reduce greenhouse gases and would be compatible with the Paris climate agreement.

The court heard that the government’s export credit agency, UK Export Finance (UKEF), and the Treasury approved funding in July 2020 on the basis that the scheme was likely to result in a net reduction in global emissions.

Friends of the Earth said this decision was reached without a proper assessment of the climate impacts.

Jessica Simor QC, for Friends of the Earth, said the conclusions reached by UKEF were “manifestly irrational” and “erroneous” and contained “glaring flaws” in their reasoning. She told the court:

“Conclusions were reached for which there was absolutely no evidence.”

The court heard that UKEF assessed the greenhouse gas emissions resulting from production of the gas in Mozambique (known as scope 1 and 2 emissions). These were likely to add 10% to Mozambique’s total.

But UKEF said it was not possible to quantify the emissions, likely to be much higher, from the use of the gas (scope 3 emissions).

Instead, its gas market consultant, Wood Mackenzie, carried out what was described as a “high level qualitative assessment” of the volume of emissions that would be potentially displaced by the project. This was based on an assumption that the Mozambique gas would replace higher carbon coal and oil in electricity generating stations in India or China.

Ms Simor said

“This makes no sense to us. It is frankly absurd.”

She said:

“It is not possible to reach the conclusion that the LNG project would lead to a reduction in global emissions and be in alignment with the Paris Agreement low emissions pathway without quantifying LNG emissions.”

This was a “vital element in any meaningful analysis”, she said.

Ms Simor said it was possible to calculate the greenhouse gas emissions from burning LNG, despite what UKEF said. Wood Mackenzie was not a climate expert, she said, and was not qualified to make the assessment it was asked to do.

It was wrong to assume all the gas would go to India or China, she said, when project assessments had predicted 22% would go to Europe, 13% to China and only 9% directly to India.

Friends of the Earth also argued that the Wood Mackenzie assessment was based on limiting warming to 2C. The impact of the Mozambique project was never assessed against the global ambitions to limit of 1.5C, which was the central aim of the COP26 climate talks in Glasgow last month.

The court heard that some government ministers, including the foreign, business and international development secretaries and the COP26 secretariat had opposed financing the Mozambique project. But there were concerns in Whitehall that the government could be sued if it pulled out. It would also be embarrassing to the UK, given its role in the African Development Bank, which was co-funding the scheme, the court was told.

Six months after the approval, in December 2020, Boris Johnson promised to end public support for overseas fossil fuel industries. But this policy was not applied retrospectively to the Mozambique project.

Today, 17 scientists and academics sent an open letter today to Boris Johnson, urging the UK government to withdraw its funding.

They warned that gas from the project would release around four billion tonnes of carbon dioxide when it was burned. This was incompatible with the warming limit of 1.5C and risked the UK’s “credibility as a global leader on the climate crisis”, they said.

Mozambique is on the most vulnerable countries in the world to climate change, particularly from sea level rise along its low-lying coast. Friends of the Earth said the LNG projects risked polluting and causing irreversible damage to important wildlife sites on the Cabo Delgado coastline and the neighbouring UNESCO biosphere Quirimbas Archipelago.

The government’s case will be heard over the next two days. It is expected to argue that there was no specific standard that required quantification of scope 3 emissions and so it did not do it.

16 replies »

    • Rabble rousing!
      “Cui bono?” (Cicero) Certainly not to the benefit of Mozambique, threatened imminently by some of the worst effects of climate change –

      From Quartz Africa – “Five African countries: Mozambique, Zimbabwe, Malawi, South Sudan, and Niger, are among the world’s top 10 nations to be the worst affected by climate change through disruptions to productivity in key economic sectors including agriculture, roads, dams, and other infrastructure according to the new Global Climate Index 2021released by Germanwatch.

      These impacts from extreme weather events such as cyclones and flooding have exerted extra economic pressures on local economies as already strained governments and development partners have to quickly provision for emergency funding requirements to rebuild destroyed infrastructure and respond to the immediate needs of affected citizens.”

      No, for the benefit of this murderous and increasingly repugnant industry, not industry in general but those which consciously embark upon actions which cause unparalleled suffering in their own interests.

      Beware of aligning yourself with the long list of self-interested deniers. Don’t forget the ClimateGate scandal of 2009 which so nearly destroyed the Copenhagen summit.

      • Why not ask the citizens of Mozambique? Have you been there? I have and they need projects like this to provide employment (food, accommodation, medical care). In fact I’ve been to all the countries in your list except Niger. I don’t see FOE offering anything that will provide the same. Just wasting money in Court. And I doubt any of them have been there either. As for climate change, this project will make no difference to the impacts of climate change on Mozambique, we need more LNG from places like this so we are less dependent on Russia. We meaning Western Europe. It would appear that FOE and supporters are prepared to leave people unemployed, hungry and without shelter now, for the “greater good” in the future?

      • But, Mozambique was the country seeking the loan! Could have obtained it from China, and then what?

        Another simple fact that has to be ignored to make the narrative work. But, it is fact, so sorry the narrative does not work.

        • Correct Martin.

          https://chinaafricaloandata.bu.edu/

          “Between 2000 and 2019, SAIS-CARI estimated Chinese financiers signed 1,141 loan commitments worth US$153 billion with African governments and their state owned enterprises.”

          $2.3 billion of this to Mozambique…..a staggering $43 billion to Angola – guess what Angola has lots of?

    • If you genuinely cared about Mozambique’s development, you would be completely against projects like this. You obviously aren’t familiar with the “resource curse”…

      1) Most profits are taken out of the country by whatever multinational companies are involved

      2) Local taxpayer money is used to payback the loans + interest

      3) The money that is left in country goes into the hands of the very few, already filthy rich and often corrupt, local, politicians/business leaders (who don’t tend to spend it within the local economy). There is zero filtering down to the majority population

      4) The well paid jobs provided by the project are usually taken by foreign nationals employed by the oil company. The jobs provided to locals are low-paid, even for local standards, and often dangerous

      5) Pre-existing tendencies towards corruption are exacerbated, leading to a weakening of state institutions, the rule of law and democracy.

      6) Much the same regarding increased conflict as a result of ethnic certain groups being favoured by the development with money and influence and using it to benefit their own group whilst others vie for control

      7) Local mismanagement of the sudden influx of foreign investment can have unintended economic consequences such as rising inflation, soaring exchange rates and damaging of non-oil sectors –

      https://www.theguardian.com/global-development/2021/nov/09/a-wealth-of-sorrow-why-nigerias-abundant-oil-reserves-are-really-a-curse

      8) Local water supplies and habitats essential for local food sources and livelihoods are poisoned and destroyed

      9) Local communities within the planned development area are forced out and protestors often beaten, tortured or killed – https://en.m.wikipedia.org/wiki/Ogoni_Nine

      I haven’t been to any of the five countries mentioned above, but I’m currently in Nigeria where many of the above consequences are plain to see on a day to day basis

      • Well said Iaith1720 and HHInvader. These inconvenient Royal Dutch Shell hand in the deaths of the Ogoni Nine and the ongoing fight for justice have been pointed out before on Drill or Drop? And as usual are quickly ignored by those for whom the facts are too embarrassing to address.

        Perhaps when Royal Dutch Shell have their general meeting on Friday 10th December in order to seek agreement to change their name to “Shell” and move their headquarters to the United Kingdom(!)

        It is a fact that the UK tax payer is to be forced by Rishi Sunak to pay for 130% of “Shell”s tax bill? (then what benefit does that then give to the UK tax payer in any way whatsoever? None at all, it will be a burden and a massive drain on the struggling UK tax payer.

        The UK tax payer and voter, having finally appreciated that insulting 130% insult to come. Amongst so many other all too recent insulting government debacle’s.

        And considering the governments only too visible COP26 fumbled hypocrisy.

        Then perhaps the UK tax payer should demand full accountability from Rishi Sunak. And also demand a referendum to decide whether the UK tax payer should have anything to do with the polluter and exploiter Royal Dutch Shell, (“Shell” to be).

        And then collectively refuse to pay for “Shell”s tax bill to the tune of 0.130% let alone 130.00%!

        • Phil C – yet again you are posting about Shell’s 130% tax bill being picked up by the UK tax payer. I duck ducked Shell and 130% tax break and guess what – no mention of Shell but lots of links to the 130%. You may want to check the links to understand what the 130% actually means:

          https://www.gov.uk/guidance/super-deduction

          https://www.discountednewvans.com/news/130-super-deduction-tax-break

          https://www.gov.uk/government/publications/new-temporary-tax-reliefs-on-qualifying-capital-asset-investments-from-1-april-2021/new-temporary-tax-reliefs-on-qualifying-capital-asset-investments-from-1-april-2021

          “What equipment can I claim super-deduction against?”

          The kind of assets that qualify for the super-deduction include but are not limited to:

          Solar panels
          Computer equipment and servers
          Tractors, lorries, vans
          Ladders, drills, cranes
          Office chairs and desks
          Electric vehicle charge points
          Refrigeration units
          Compressors
          Foundry equipment

          Perhaps it also includes oil production platforms? How many of these will Shell be building in the UKNS?

          • Thanks for your comment Paul, however, it avoids referring to mine and HHInvader comments.

            Yet again, I am still still posting about the inconvenient fact of Royal Dutch Shell’s hand in the deaths of the Ogoni Nine and the ongoing fight for justice have been pointed out before on Drill or Drop? Perhaps you would be so kind as to comment on HHInvader’s comments too?

            That’s a subject that Royal Dutch Shell was involved in that requires some research isn’t it.

            So lets look at the comment you choose to isolate on the 130% that the UK tax payer is expected to provide?

            As regards the 130% that the UK tax payer is expected to hand out, perhaps it would be better to ask Rishi Sunak Paul. Perhaps it would be more edifying to read the announcements he made? And then ask why Royal Dutch Shell after 130 years have decided to drop the Royal Dutch name and only use the “Shell” name, and why “Shell2 will be moving their headquarters to the united Kingdom? What exactly was the draw? Perhaps there are plans to take advantage of the 130% tax relief in an, as yet. unannounced manner?

            From your link:
            https://www.gov.uk/guidance/super-deduction

            From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim:
            a 130% super-deduction capital allowance on qualifying plant and machinery investments
            a 50% first-year allowance for qualifying special rate assets

            Please provide definition of the terms:

            “a 130% super-deduction capital allowance on “qualifying” new plant and machinery assets” and “qualifying” special rate assets”

            How would that apply to “Shell”? Now that is a question worth researching. Thanks for highlighting that. You see how co-operation reveals further avenues of investigation?

            Why should the UK tax payer even be asked to provide 130% tax relief for any such “assets”? let alone for “assets” that have yet to be legally defined for any application? As usual, its not what is said by politicians such as Rishi Sunak, its the lack of definition that accompanies the announcements.

            From your link:
            https://www.discountednewvans.com/news/130-super-deduction-tax-break

            “There is not an exhaustive list of plant and machinery assets”. The kinds of assets which may qualify for either the super-deduction or the 50% First Year Allowance include, but are not limited to”:

            “Not an Exhaustive list”? That’s interesting isn’t it? Just what is the exhaustive list since 1st April? No joke intended.

            • Vans, Tractors, lorries (New equipment for such as “Shell” to invest as “assets”?)
            • Solar panels (Are “Shell” amongst others, planning on moving into solar panels on a large scale?)
            • Computer equipment and servers (Nothing gets done without software and hardware these days. A massive corporation such as “Shell” would have a massive increase in such “assets”)
            • Ladders, drills, cranes (Define Ladders, drills and cranes in fossil fuel exploration and extraction?)
            • Office chairs and desks (New headquarters for such as “Shell” and others will be required)
            • Electric vehicle charge points (Maybe “Shell” will be investing in “assets” such as EV’s of all types?)
            • Refrigeration units (That’s an odd one? Something to do with “vaccines” maybe? A highly profitable business by all accounts.)
            • Compressors (Oil and gas distribution “assets” to either upgrade, or add to existing gas distribution networks perhaps?)
            • Foundry equipment (Manufacturing “assets”?)

            From your link:
            https://www.gov.uk/government/publications/new-temporary-tax-reliefs-on-qualifying-capital-asset-investments-from-1-april-2021/new-temporary-tax-reliefs-on-qualifying-capital-asset-investments-from-1-april-2021

            “This measure will temporarily introduce increased relief for expenditure on plant and machinery. For qualifying expenditures incurred from 1 April 2021 up to and including 31 March 2023, companies can claim in the period of investment:

            a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
            a first year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances”

            Much the same, “a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances”

            So 18% increased to 130% allowances. That is a massive increase, regardless of how it is measured, as yet to be defined by: “Not an Exhaustive list”.

            So maybe what that indicates, is that corporations such as “Shell” (to be) will be massively increasing their investment in new “super deduction assets” for which the UK tax payer will be expected to foot the 130% bill, rather than the previous limit of 16%.

            Not a bad incentive to move a headquarters to a new market is it?

            There is another aspect of all this, and that is, following the demise of COP26, and in the present throes of the latest variant furore, it is a truism that 1 in 5 people worldwide are dying from fossil fuel pollution. Corporations such as “Shell” are responsible, worldwide for 7 times more deaths due to fossil fuel pollution than the present pandemic mortality rate. Where is that inconvenient fact in these tax, super or otherwise, incentives to such as “Shell” and others to be paid for by the UK tax payer?

            That amounts to piling insult on top of injury doesn’t it.

            Thanks Paul, for allowing the contentious issues to be opened and expanded for further discussion.

            Always a pleasure.

            • So, in the apparent absence of any reply regarding the “Ogoni Nine”.

              And just so “we” all know just what “supertax” actually refers to, here is the Cambridge dictionary definition:

              https://dictionary.cambridge.org/dictionary/english/supertax

              Meaning of supertax in English
              supertax
              noun [ C or U ]
              TAX
              uk
              /ˈsuːpəˌtæks/ us
              a very high rate of income tax or company tax paid by those with a very high level of income or profit:
              Introducing a new supertax could help to make up the deficit in the public spending budget.

              (Definition of supertax from the Cambridge Business English Dictionary © Cambridge University Press)
              Examples of supertax
              supertax
              Surtax, which originally was supertax, was introduced in 1910.
              From the Hansard archive
              Tenants and ratepayers are paying more, and only supertax-payers are paying less.
              From the Hansard archive
              Is that not assuming that all supertax payers are exporters?
              From the Hansard archive
              That is the only downward change which has been made in the surtax since 1921 when it was introduced as the supertax.
              From the Hansard archive
              Few hearts will bleed tonight for the supertax payers.
              From the Hansard archive
              The supertax-payer gets his share of food subsidies.
              From the Hansard archive
              The same process makes middle-income earners into supertax payers up the scale.
              From the Hansard archive
              There are some which are levied upon capital, there is a supertax on income.
              From the Hansard archive

              Therefore, for any corporation, who certainly will find any avenue of avoiding (or any other acceptable term) paying any tax in a country in which it is legally registered as having its headquarters. Even if their true assets are carefully moved through various “shell” companies elsewhere in complex multiple tax haven “trusts”. They will be equally interested in avoiding paying the previously inescapable but relatively small 16% of supertax on new assets required to set up in a new financial environment outside of the EU in the UK. to have that increased to 130% must be the gift of the century. Not however for the UK tax payer.

              There is still little or no progress on this government chasing down assets in off shore tax havens.

              Go figure.

              • Typo there above. 3rd paragraph up from the last:

                “They will be equally interested in avoiding paying the previously inescapable but relatively small (16%) of supertax on new assets required to set up in a new financial environment outside of the EU in the UK”

                The figure is 18%, not (16%).

                Could that be changed please?

                Thanks

            • See below PhilC (or above depending on where this ends up). Re HH.

              HH refers to Nigeria and the Ogoni 9. He is best placed to discuss this with you.

              There is no doubt that the world is a better place thanks to companies like Shell.

              • Ahhh….”Nothing to see here, move along please”? Oh dear.

                Happy to talk to HHInvader. You should too. Better to actually discuss the Ogoni Nine hanging events in Nigeria right here in public though. Otherwise it might be (mis) construed as avoidance?

                However, I was saying just that about Royal Dutch Shell and the Ogoni Nine in Nigeria, years ago. Didn’t you notice? Was Nigeria also one of the places you went to in your travels by the way?

                Never mind.

                Have a Nice Day!

      • HHInvader – I am part of your “resource curse” having worked in the upstream oil and gas industry for over 30 years, mostly overseas, in Africa (North, East and West), Middle East and Far East. Local jobs were available, much sought after, competition very high, and jobs much appreciated. Obviously jobs were short term in the exploration phase but long term in the development phase. Most contracts with Governments included programs whereby companies trained nationals and nationals took over expat jobs through a specific timetable. Most countries also had contract clauses which included state oil company personnel in the organisation of the foreign oil company.

        Have a look at Tullow in Ghana, check how many nationals are involved in the Jubilee and TENS developments.

        Have a look how Vietnam controls it’s oil and gas industry, through JOCs.

        Would you prefer the Chinese ran everything? See post above. I worked in Angola for a couple of months. A new office building was being constructed next to ours by the Chinese. They were using Chinese labour. In a country with 60% unemployment at that time. Is this what you want?

        What you have listed in your post may be valid in some countries. However the corruption will not be limited to a single industry.

        I have worked in around 30 countries and have not witnessed what you describe.

        I would be interested to read how you propose to “develop Mozambique”?

        Hopefully not like ISIS-affiliated Ahlu Sunnah Wal Jamaah (ASWJ)?

  1. Sorry folks but the British are no longer colonizing other parts of the world.

    It really is up to them to decide their own futures and how to go about it. Patronizing these countries and posting about wanting to fly to that part of the world is so old school. What do those doing so expect to see? I can tell you. Poor people currently who don’t want to remain poor and want to be educated and have a decent health service-and they want to be able to do so by utilizing their own resources with some financial help if needed. Not hand outs to maintain the current status quo to entertain the tourists and provide them with some trinkets.

    So, HHInvader, you would therefore prefer UK develops more local oil and reduces oil imports from Nigeria? Perhaps you could inform one or two about the higher standards of production in UK and the better treatment of locals, and remind them how tankers get from Nigeria to UK.

    And, Paul, I do like the super deduction. It is a great idea at this particular time to encourage productivity improvements via accelerated investment into capital equipment. I listened to an engineering company talking about the new machinery they would invest in and what that would mean, not only in productivity but also employment. It might even be available to those wishing to expand renewables/hydrogen-on top of the £100m Sir Jim is supplying-see Hiiroc as an example!

Leave a Reply to Phil C Cancel reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s