BP has become the latest oil company to face a shareholder revolt over its investments in Canada’s controversial oil sands. A coalition of shareholders has tabled a resolution for the oil giant’s annual meeting on April 15 highlighting what they describe as the environmental and social risks of tar sands development.
The resolution, which follows a similar action taken by investors in Royal Dutch Shell, follows BP’s announcement last week that it is set to press ahead with a $10 billion investment in the industry.
Vast reserves of oil lie locked in the bitumen-rich sands of Northern Alberta but processing them into a heavy form of synthetic crude oil is an expensive and environmentally fraught activity which critics say is unsustainable and should be stopped.
Shareholders sponsoring the resolution, led by FairPension, include the Co-operative Asset Management, the Unison Staff Pension Scheme, Rathbone Greenbank, CCLA Asset Management and other fund managers, foundations and faith groups.
Niall O'Shea, head of responsible investing at the Co-operative Asset Management said: "BP, which previously made a virtue of its lack of exposure to oil sands, is now gearing up to exploit them. We believe that environmental costs may make an expensive business prohibitively so - without fundamentally addressing the issue of a large net rise in emissions. BP should reassure shareholders that what they're embarking on is fully costed, prudent and can withstand a more carbon-constrained world."
The resolution raises questions about the high costs of producing oil sands, and the risks to BP’s future profits presented by rising costs for emitting carbon dioxide as well as the legal and reputational risks stemming from environmental damage.
Andy Inglis, BP’s head of exploration and production, said the oil giant would make a final investment decision on its Sunrise oil sands project - a joint venture with Canada’s Husky Energy - later this year.
A spokesman for BP said: “We believe that this development is needed to meet the world’s growing demand for energy and we believe BP can do it in an environmentally sustainable way.”
At its results on Tuesday, chief executive Tony Hayward pointed out that BP was adopting a different technology from many other companies involved in the tar sands business which he said was preferable in terms of its environmental impact.
The technique, so-called “steam assisted gravity drainage”, is used to extract the oil in situ and avoids the mining of large tracts of land that have been adopted by some producers.
BP acquired a 50 per cent in Husky’s Sunrise project near Fort McMurray, Alberta in 2007 and at the same time sold Husky a 50 per cent share in its Toledo refinery in Ohio.
The announcement represented a clear break with the past for Tony Hayward, BP’s chief executive, whose predecessor Lord Browne of Madingley was an outspoken critic of costly oil sands developments.
He had sold off BP’s interests in Alberta in 1999, opting instead to focus on higher-risk but higher-return investments in countries such as Russia. Colin Butfield of the WWF said extracting oil from tar sands caused three times the carbon emissions of conventional production and had a “devastating” impact on land andf wildlife.
"Unconventional fuel sources may seem attractive in the short term but ultimately the economic and environmental costs are unthinkable,” he said.
BP estimates that 193 billion barrels of oil are contained in the oil sands - placing Canada second only to Saudi Arabia in a ranking of countries with the biggest proven reserves.
Vast reserves of oil lie locked in the bitumen-rich sands of Northern Alberta but processing them into a heavy form of synthetic crude oil is an expensive and environmentally fraught activity which critics say is unsustainable and should be stopped.
Shareholders sponsoring the resolution, led by FairPension, include the Co-operative Asset Management, the Unison Staff Pension Scheme, Rathbone Greenbank, CCLA Asset Management and other fund managers, foundations and faith groups.
Niall O'Shea, head of responsible investing at the Co-operative Asset Management said: "BP, which previously made a virtue of its lack of exposure to oil sands, is now gearing up to exploit them. We believe that environmental costs may make an expensive business prohibitively so - without fundamentally addressing the issue of a large net rise in emissions. BP should reassure shareholders that what they're embarking on is fully costed, prudent and can withstand a more carbon-constrained world."
The resolution raises questions about the high costs of producing oil sands, and the risks to BP’s future profits presented by rising costs for emitting carbon dioxide as well as the legal and reputational risks stemming from environmental damage.
Andy Inglis, BP’s head of exploration and production, said the oil giant would make a final investment decision on its Sunrise oil sands project - a joint venture with Canada’s Husky Energy - later this year.
A spokesman for BP said: “We believe that this development is needed to meet the world’s growing demand for energy and we believe BP can do it in an environmentally sustainable way.”
At its results on Tuesday, chief executive Tony Hayward pointed out that BP was adopting a different technology from many other companies involved in the tar sands business which he said was preferable in terms of its environmental impact.
The technique, so-called “steam assisted gravity drainage”, is used to extract the oil in situ and avoids the mining of large tracts of land that have been adopted by some producers.
BP acquired a 50 per cent in Husky’s Sunrise project near Fort McMurray, Alberta in 2007 and at the same time sold Husky a 50 per cent share in its Toledo refinery in Ohio.
The announcement represented a clear break with the past for Tony Hayward, BP’s chief executive, whose predecessor Lord Browne of Madingley was an outspoken critic of costly oil sands developments.
He had sold off BP’s interests in Alberta in 1999, opting instead to focus on higher-risk but higher-return investments in countries such as Russia. Colin Butfield of the WWF said extracting oil from tar sands caused three times the carbon emissions of conventional production and had a “devastating” impact on land andf wildlife.
"Unconventional fuel sources may seem attractive in the short term but ultimately the economic and environmental costs are unthinkable,” he said.
BP estimates that 193 billion barrels of oil are contained in the oil sands - placing Canada second only to Saudi Arabia in a ranking of countries with the biggest proven reserves.
Source: The Times
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