Shareholders seeking oil sands disclosure

Shell and BP are being urged to take action to satisfy shareholder concerns over the energy companies’ involvement in Alberta’s oil sands.

In an investor webcast today, Sustainalytics oil and gas analyst Dayna Linley noted that although the social and environmental impacts of the oil sands are quite severe, it’s largely the result of cumulative development.

“The exposure is not specific to Shell and BP,” she said. “We put Shell in the top quartile in terms of performance on overall ESG issues and BP in the top half. So these companies are not laggards on ESG issues.”

Still, both companies have performance areas in which operational practices are lagging best practices and both are lacking in oil sands specific disclosure and cumulative impact awareness planning, Linley added. “There is a risk to Shell and BP in terms of environmental performance. The company is not satisfying shareholders.”

“It would be prudent for the companies to take action to mitigate risk and close the gap with best practices. They should acknowledge the risks and disclose to shareholders how they are mitigating them.”

On issues related to greenhouse gas and other emissions, Shell and BP have no more exposure than other oil sands players, and have strong past carbon management, Linley said.

“Is there risk on this issue? We don’t think so. Has the company satisfied shareholders? We would say no. It would be prudent for Shell and BP to publicly comment on these issues and disclose further detail around management systems and planning that would satisfy shareholder concerns.”

“The most important thing is that Shell and BP shareholders are asking for information on carbon and other risks. And we know there are a lot of misconceptions about the oil industry. So increasing company disclosure may help alleveiate this and seems to be a win-win for everyone.”

So-called unconventional oil development, such as tar sands, is becoming “the new normal,” Linley pointed out, and both Shell and BP “need to be in that game” to remain competitive. By the same token, the companies cannot afford to ignore environmental and social risk, she added.

“ESG factors are becoming more important to investors. Oil sands development needs to be done right.”