The US export credit agency voted to approve a $500 million loan guarantee for an oil and gas drilling project in Bahrain, testing a US climate pledge to stop backing projects that expand the use of fossil fuels.

The board of directors at the Export-Import Bank of the US (EXIM) approved the project after voting last month to notify Congress about potentially supporting the expansion of an oil and gas field in Bahrain with over 400 new oil wells and 30 gas wells.

While EXIM's guarantee loan to Bapco Energies would be out of step with the Biden administration's pledge to stop public financing of fossil fuel projects overseas, according to Democratic lawmakers opposed to the loan, as well as environmental activists, the agency said the project includes measures intended to reduce greenhouse gas emissions.

Bapco had signed on to the COP28 Oil and Gas Decarbonisation Charter, which commits it to achieve net-zero operations by 2050 and end routine flaring by 2030.

'This transaction will support thousands of US jobs and play a crucial role in ensuring Bapco Energies is able to achieve its climate goals of enhanced grid interconnectivity, more efficiency, decarbonisation, and investments in large-scale solar projects,' EXIM President and Chair Reta Jo Lewis said in a statement.

The US was one of more than 30 countries that joined a pledge to end public financing of fossil fuel projects overseas at the COP26 climate conference in Glasgow in 2021.

But the US, through its export agencies, has approved eight fossil fuel projects totaling more than $2 billion since it made that pledge.

An environmental group filed a complaint in December with the Organisation for Economic Co-operation and Development over EXIM's oil and gas financing deals.

EXIM is also weighing support of fossil fuel projects in Papua New Guinea and Guyana, with votes due later this year. US oil giant Exxon is developing one of the world's biggest oil discoveries in Guyana.