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A whistleblower CEO who partnered with Shell on an emission reduction project says the Chinese oilfield his company supplied to was actually a chicken farm, as Germany battles allegations of a potential $5 billion fraud over carbon reduction schemes.<\/p>\n
Several biomethane suppliers who have partnered with major oil and gas companies on Upstream Emission Reduction (UER) credit schemes say dozens of overseas projects were faked, putting German regulators, auditors, and companies like Shell in the spotlight.<\/p>\n
Zoltan Elek, the CEO of Landw\u00e4rme, a biomethane supplier to Shell and other large oil and gas firms, flagged the complaint about a supposed chicken farm posing as an oilfield to Shell\u2019s internal whistleblower site in January.<\/p>\n
Emission reduction schemes like UER help large oil and gas companies meet their greenhouse gas (GHG) reduction quotas.\u00a0Carbon credits obtained in the process are traded on the open market to allow businesses to offset their CO2 emissions.<\/p>\n
Semafor<\/em> first reported<\/a> Elek\u2019s complaint on Wednesday morning.<\/p>\n The chicken farm was just one of several false sites Elek says a Chinese whistleblower uncovered in September.<\/p>\n \u201cThe whole documentation always looked very good and perfect,\u201d Elek told Fortune<\/em>. \u201cBut if you took out something like the geo-coordinates, you ended up somewhere, sometimes in a lake, sometimes in a chicken farm.<\/p>\n \u201cIt\u2019s like if somebody wants to generate some CO2 certificates with a windmill and just goes out to the countryside and takes a picture of a windmill which he doesn\u2019t own.\u201d<\/p>\n The company auditing Landw\u00e4rme\u2019s project told the German publication Die Welt<\/em> the error resulted from a typo<\/a>.<\/p>\n \u201cEvery project, it\u2019s on the front page, the geo-coordinates. So it was easy to just Google it and see what is there,\u201d Elek said.<\/p>\n Further, several companies didn\u2019t appear to exist, with Elek finding many created in 2022 with no address or registered in Hong Kong.<\/p>\n Because of the alleged fake carbon credits streaming out of China, their prices have collapsed by about 80% on the open market, Elek says.<\/p>\n Elek\u2019s company has declared itself insolvent as Germany tries to get to the bottom of an alleged fraud that, according to one German industry lobby group, could total up to $5 billion.<\/p>\n UER projects<\/a> achieve carbon emissions reductions for petrol, diesel, and gas before they reach the refinery or storage stage. It is one of several methods oil and gas giants use to lower or offset their emissions.<\/p>\n These companies, including Shell, have used Chinese territory to carry out UER projects as part of their greenhouse gas reduction (GHG) quota. They receive certificates from these projects certifying that their efforts have led to reduced upstream CO2 emissions.<\/p>\n China commanded 90% of global UER projects in 2023, rising from an 80% share between 2020 and 2022.<\/p>\n However, a scandal over the veracity of these schemes in the country has been circulating in German media for several months.<\/p>\n Research by the German outlet ZDF alleged<\/a> at least a quarter of UER projects were faked by overseas agents.<\/p>\n The scandal raises serious questions about the safeguards in place for carbon reduction projects, which have grown in popularity as polluters try to offset their emissions.<\/p>\n Elek has his own questions for Shell if the company is found to have invested in fraudulent projects. There hasn\u2019t been allegations of wrongdoing on Shell\u2019s part, with German prosecutors investigating auditors and creditors of the project.<\/p>\n \u201cYou don\u2019t buy 10 projects with a market value of \u20ac1 billion without doing your due diligence. And I\u2019m really wondering how Shell\u2019s due diligence went through a non-existent company,\u201d Elek said.<\/p>\n A representative for Shell told Fortune<\/em> the company always acts in accordance with the relevant laws and regulations.<\/p>\n \u201cThis means that before certificates from UER projects are taken over or credited, the corresponding project activity is checked by the authorities in several steps,\u201d the spokesperson said.<\/p>\n \u201cIn addition to the statutory audits by the authorities, Shell conducts its own due diligence on a voluntary basis and fully supports any inspections by German authorities.\u201d<\/p>\n \u201cThe Federal Environment Agency is currently investigating the allegations mentioned. We are waiting for the results of these investigations.\u201d<\/p>\n Germany\u2019s Federal Environment Agency has suspended a senior employee who was responsible for approving UER projects, ZDF reported<\/a>.<\/p>\n The country has since moved to suspend UER projects in China and has stopped accepting new projects anywhere.<\/p>\n Elek is far from satisfied with the German authorities\u2019 response, with carbon credits from allegedly faked projects still contributing towards oil and gas companies\u2019 quotas.<\/p>\n \u201cIt\u2019s like you\u2019re stealing at the supermarket. You can keep the good, you can continue to resell it on Amazon, and the only reaction was closing the supermarket so nobody can steal anymore next year.\u201d<\/p>\n He fears shuttering all UER projects will cause further insolvencies for companies working on genuine oilfields.<\/p>\n The scandal threatens the future of several sustainable fuel suppliers in Germany after Landw\u00e4rme declared itself an early casualty.<\/p>\n<\/div>\nGermany\u2019s UER push turns sour<\/h2>\n
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