For The Love Of Oil...

Investors want oil giants to answer questions on their involvement in the environmentally damaging extraction of oil from tar sands

Shareholders at BP and Shell will get the chance to vote at upcoming AGMs on whether to force oil giants to come clean on their Canadian tar sands involvement

Institutional investors including The Co-operative Asset Management and Rathbone Greenbank have co-signed a ‘special resolution,’ which would force the two companies to fully disclose and justify their involvement in Canadian tar sands.

The oil sands in Canada are the largest reserve of petroleum in the world outside of Saudi Arabia with an estimated 1.7 to 2.5 trillion barrels of oil trapped in a mixture of sand, water and clay.

However, the energy needed to extract and process the oil results in greenhouse gas emissions per barrel three times those of conventional oil. The spread of the tar sands exploration and production is also destroying forests and impacting on local wildlife and communities.

Shell has invested almost one-third of its resources in extracting oil from tar sands and produces 155,000 barrels a day. However, it is reported to be 'scaling down' some of its investment because of concerns over the high costs of extracting the oil.

In contrast, BP is rapidly expanding its investment. Amidst criticism from investors, the oil company has acquired a 50 per cent stake in the Sunrise Project, a tar sands extraction project near Alberta and has entered into talks to buy a major share of Canadian oil sands company Value Creation.

Shareholder power

The investors putting forward the special resolution remain sceptical that it will get the 75 per cent support necessary for it to be passed and discussed but are hopeful it will bring the issue of tar sands to the fore once again.

‘Since the resolution was announced, BP has been forced out of their bunker to comment on the carbon intensity of the projects, the oil price they need to make the projects economically viable and whether they are factoring in a carbon price,’ said Niall O’Shea, Head of Responsible Investing at the Co-operative Asset Management.

‘Realistically there is no chance that we will get enough votes for the resolution to be passed, but it’s what happens around the resolution that is important,’ he added.  

The NGO Fair Pensions, which helped to draft the resolution, said even when unsuccessful such resolutions can prove influential.

‘If you look back at the history of shareholder activism there have been changes in company behaviour when a small percentage of investors vote in favour of special resolutions of this kind. 

'Hugh Fernley Whittingstall’s ‘free-range chicken resolution’ had a big impact even though only one in ten investors voted for it,’ said Louise Rouse of Fair Pensions.