Lobbyists bid to turn RBS, BP and Shell annual meetings into green referendums

British companies spearheading the drive to exploit the Canadian tar sands will come under renewed assault this week from an increasingly vocal group of shareholders and environmentalists who are planning to turn the forthcoming BP, Shell and Royal Bank of Scotland annual meetings into a referendum on these controversial operations.

The Co-operative and the Fair Pensions lobby group are releasing a special briefing paper designed to counter recent statements by the oil companies that sought to justify their involvement in carbon-intensive oil extraction in Alberta on the basis that it was needed to meet rising oil demand.

Friends of the Earth, Platform and other green groups are publishing a new report, Cashing in on Tar Sands – RBS, UK Banks and Canada’s Blood Oil, which claims RBS has provided loans of $7.5bn (£4.9bn) in the past three years to companies carrying out this kind of mining in North America.

There are signs the oil companies and the Canadian government are becoming increasingly concerned about the reputational damage that could be inflicted on them: a special “tar sands day of learning” was held at the headquarters of the Royal Bank of Canada in Toronto on 1 February to bolster the confidence of fellow bankers and investors.

The Co-op’s investor briefing, designed to rally further opposition, warns institutional investors with highly diversified portfolios that allowing BP and Shell to pursue their costly tar sands extraction could undermine their holdings in other areas of the economy.

“The issue for many large investors is not just whether the macroeconomic conditions necessary to ensure the profitability of oil sands production are in place, but whether the continued expansion of oil sands production could aggravate climate change, thereby putting at risk gross domestic product growth and the performance of their portfolio as a whole,” says the new document.

Fair Pensions last week announced the establishment of a new web tool allowing individual pension holders to lobby their fund managers, who are big investors in BP and Shell. More than 1,200 people have taken advantage of it on www.countingthecost.org.uk.

The Friends of the Earth and Platform report is being released tomorrow, on the day a coalition of non-governmental organisations seeks a judicial review against the Treasury over its willingness to allow RBS to finance companies alleged to be exacerbating climate change and disregarding the human rights of local indigenous peoples. RBS is now largely publicly owned and the NGOs believe the government could stop it from acting in ways that are counter to its climate-change policies.

Tar sands oil has soared up the investment, political and environmental agenda since the Copenhagen climate change summit highlighted the need for a clampdown on the most carbon-intensive activities that are the biggest threat to global warming.

Shell, a leader in the tar sands business, had shown signs of backtracking in recent months, with new chief executive Peter Voser saying: “We look at them as being developed, but at a much slower pace.” But the company will still go ahead with plans to increase production by 100,000 barrels a day, which it is said will raise CO2 emissions from its current level of 3.7m tonnes a year to 5m by 2015.

BP is more bullish than ever: chief executive Tony Hayward said it could be getting 100,000-200,000 barrels a day from tar sands by 2015 and was already preparing two US refineries specially to process this kind of crude.

Despite mounting opposition from politicians, as well as some investors and non-governmental organisations, Hayward is convinced: “Canadian heavy oil is going to be a very important part of America’s energy.”

But not if the Co-op and Fair Pensions can help it. They have had a resolution accepted for BP and Shell’s AGMs, asking both companies to undertake reviews on the risk of tar sands extraction, with reports to be made to the 2011 AGMs.

The BP resolution wants details of “assumptions made by the company in deciding to proceed with the Sunrise [tar sands] Project regarding future carbon prices, oil price volatility, demand for oil, anticipated regulation of greenhouse gas emissions and legal and reputational risks arising from local environmental damage and impairment of traditional livelihoods”.

Both BP and Shell insist that they can extract oil from tar sands in a responsible way, with the latter arguing that CO2 emissions can be minimised by using carbon capture and storage (CCS) techniques. Shell says a planned CCS plant in Edmonton, Alberta would take more than 1m tonnes a year out of the atmosphere by 2015 and could be expanded in future.

Tar sands, or oil sands, are deposits of sand and clay saturated with bitumen, which is oil in a solid or semi-solid state. The region where they have been found, in the ancient forests of Alberta, is said to cover an area bigger than England. When the bitumen is close to the surface it is excavated in an opencast mine. The land is cleared and the bitumen-soaked sand is dug out with mechanical shovels and loaded on to trucks to be taken to a separation plant.

BP stresses it does not get involved in such controversial strip-mining, but bringing the oil out from deeper deposits has its own serious problems: it requires power and steam-generating plants that use a lot of energy and water. In some cases, steam has to be injected into wells to encourage the bitumen to flow.

BP claims the method of production used in the Sunrise Project only emits 5% more greenhouse gases than commonly imported conventional fuels. But the Co-op says the Jacobs report, which is quoted by the oil company in support of these figures, is “subject to challenge” because it has not been peer-reviewed.

“Peer-reviewed studies and US government studies show that the relative emissions of oil sands are much higher than BP claim,” says the briefing paper, which questions the companies’ assumptions that global oil prices will remain high enough in future to justify the heavy investment costs of bringing oil out of the ground in this way.

Analysts at Deutsche Bank recently pointed out that continuing high oil prices – currently close to $80 per barrel – could trigger a permanent switch to more efficient oil use and low-carbon alternatives: “The value of high capex [capital expenditure] intensity, long lead time, currently undeveloped oil such as undeveloped Canadian heavy oil sands … could be far lower than the market expects.”

The involvement of a major investor such as the Co-op in the campaign against tar sands is relatively new, but back at its 2008 annual meeting Shell was accused by an individual shareholder of “selling suicide on the forecourt”.

Comment, page 52

If you want to visit the UK for a holiday to visit, now is a great time to change your Aussie dollars into pounds.

In fact, the exchange rate between the two has never been so favourable to the Australian currency. Just ten years ago, one dollar would get you a whole 35 British pence.

Today, one dollar will get you 58 pence.

The last 18 months has seen a rapid ascent - or descent if you border the Atlantic Ocean - as the pound weakened against the Australian dollar.

If you look at all the major currencies around the world, the pound has been in decline since the last few months of 2008.

So aside from planning your next holiday, or stocking up on a fancy new business shirt from TM Lewin or Thomas Pink, or ordering books from Book Depository, how does this affect you?

If the Australian dollar is buying more pounds than ever before is it time to look at investing in the UK?

Without a doubt you'd be able to find some bargains in the old mother land. But seeing as this once formidable empire is virtually bankrupt, would you really want to take that risk?

Stock markets around the world haven't yet returned to the giddy highs of previous years, and the UK is no exception. In fact, in some ways the story is even worse in the UK.

Let me explain...

You may be familiar with the Greece debt crisis. In Greece, government debt is currently 12.7% of gross domestic product (GDP). However the UK has a government debt of 7% of GDP and that figure is expected to jump to 12.6% for this financial year.

That staggering figure places the UK right next to Greece, giving the Brits a debt crisis of their own.

Like other countries, a massive amount of stimulus money was thrown at the economy to supposedly keep it moving. Not only that, but major banks like Northern Rock had to be nationalised because of their aggressive investments in the housing market. And both the UK and Ireland have had firsthand the experience of over-lending to the property sector.

Simply put, the excessive lending created a bubble, and the bubble popped.

To add to the chaos, the pound is at its weakest level in over twelve years. Although it hasn't been all doom and gloom for the Brits. At least they've been comforted by the fact that the Euro is in just as much mess.

If you compare the Pound to the Euro, it has remained relatively stable during the crisis.

The weak sterling has fuelled an increase in the UK's exports. The currency has experienced about a 22% drop since 2007 with its major trading partners.

But despite this, would the UK face these problems if it ditched the pound in favour for the Euro?

The biggest criticism of the UK not jumping on board was the exchange risk with European countries. Germany and France no longer face this issue when trading with each other.

As the Euro strengthened the cost of goods started to increase within the UK.

And as the Euro gained some ground, investors decided to dump a weak pound in favour of what appeared to be a more stable currency. And due to the presence of the big German and French economies, it's naturally more common for traders to trade the Euro against the US dollar as a currency pair than the Pound and the US Dollar.

From a trade point of view it could be argued that sterling was left behind by not joining the Euro.

But as terrible as the UK economy is right now, maybe it's a blessing that that it didn't join after all. The European Central Bank (ECB) has a 'one size fits all' approach. This means one interest rate for sixteen separate economies.

On the other hand, when you've got a central banker like Mervyn King running the Bank of England, and his policy of quantitative easing, maybe they would have been better off with the Euro.

The message seems to be clear.

It's a pretty good time to stock up on your favourite goods from the UK, but if you're looking for a currency to safely store your money then we're afraid to say that one fiat currency system is just as bad as any other!

Shae Smith
Assistant Editor
Money Weekend


Most important story of the week...

This week, Kris and Christopher Joye continued their jousting. Or maybe Kris just took one big poke? Joye was proudly telling his bloggers the he defeated doom and gloom economist Dr Steven Keens in a property debate. However, Kris poked right through Joye's 'arguments' and shed some light on the real housing data figures. Click here for more...

Monday: The upshot is the Australian economy hasn't benefited one jot from the billions spent in the stimulus programme. All it's done is allocated resources to prevent a bubble from popping - for now - and ensure thousands of people have received training for an industry that can't possibly sustain them without the presence of taxpayer money. Click here for more...

Tuesday: The truth is that the CPI number masks the real story. And that is the value of the dollar has fallen to such an extent that even the so-called housing boom has failed to maintain the value of your dollars. Click here for more...

Wednesday: Why would insurance companies lower their premiums if they know people are compelled to buy either their insurance or the insurance of their competitors? Click here for more...

Thursday: It seems that property bandit Christopher Joye can't help but make a fool of himself while feeding misinformation on property to his readers. Click here for more...

Friday: How to Buy Better Stocks... Click here for more

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