Thursday, 22 April 2010

BP Oil AGM and Canadian Tar Sands projects

I have been following closely the news from the BP AGM which took place last week.

The Central Finance Board (
CFB) of the Methodist Church has a substantial investment in BP. A shareholder resolution on Canadian tar sands projects was brought by a group of concerned shareholders. Their concern is based on the fact that removing oil from tar sands is, expensive, ecologically damaging and more energy intensive so contributes further to climate change. BP argue that the additional greenhouse gas emissions from tar sands oil shipped to the US is less than the campaigners claim. The resolution asked the company to disclose the reasoning behind its proposed long-term investment in Canadian tar sands. The CFB co-filed this resolution which was resisted by BP’s board. Although the resolution was lost (with around 85% of investors voting against it on the recommendation of the board) it has caused BP to make further disclosures to investors on the assumptions that they are using to assess the profitability of long-term development of tar sands projects.

BP has quoted the International Energy Agency’s projection of future energy demand in 2030 at a level 40% higher than 2007. This assumes no change in government policy, which the International Energy Agency states would see “a rise in global temperature of up to 6°C, with catastrophic consequences for our climate”.

The future price of carbon is also important. BP and Shell both use the figure of $40 tonne of carbon dioxide produced. Other oil companies may well be using a lower figure. Predictions for the future price of carbon are almost impossible without a framework of international legislation.

Had we succeeded in achieving a robust deal at the Copenhagen summit leading to stringent international targets on carbon emissions, BP’s projections would be less safe. However so far we have only a set of voluntary commitments from governments. It is maybe fair to assume that these are bound to take a back seat to short-term economic prosperity. A binding deal at Copenhagen would have given investors a much more sure estimate on the future price of carbon. This would have caused investors to assess the financial return on long-term investment in the more costly forms of oil extraction rather differently. As it is, the failure of Copenhagen has enabled investors to give the green light to climate sensitive tar sands projects.

A similar resolution is to be brought to the Shell AGM in May and there is still time to
write to your pension provider to express your concern. If your pension is provided by the Methodist Church, Baptist Union or United Reformed Church then we are concerned but let us know your views anyway,