Oil giants "underestimating investor risk" on tar sands, says new Greenpeace report

The report, co-authored by Greenpeace and PLATFORM and entitled BP and Shell, Rising Risks in Tar Sands Investment, has won the backing of several influential investment firms including Holden and Partners, Innovest, and Co-operative Asset Management. The report claims that shortfalls in the strategic reserves of BP and Shell are leading to a ‘distortion of management perspectives’, resulting in potentially catastrophic underestimates of risk.

"We always knew that tar sands were a risk to the climate, but now it’s becoming clear that they’re a risk to the bottom line as well," said Mike Hudema, Greenpeace tar sands campaigner. "Albertans should be aware of the monstrous economic risks that their government is taking on their behalf."

The report is released on the same day that a number of large investment funds, senior analysts and financial advisors meet in London to criticize the long term strategy of the oil majors. Both BP and Shell have become increasingly involved in the production of oil derived from the Alberta tar sands. The sector now accounts for some 30 per cent of Shell’s proven reserves.

The report examines a number of factors which threaten the long term profitability of the sector:

Low carbon fuel standards under consideration by US presidential candidate Barack Obama and already implemented in California threaten to close sections of the American market to products derived from tar.

Acute labour shortages and the rising cost of delivering gas to the tar sands threaten to stifle the planned expansion of the sector.

An unrealistic reliance on untested carbon capture and storage (CCS) technology risks leaving the companies with huge stranded assets in the future, as international climate change regulations are strengthened at Copenhagen next year.

The extensive clean up operation and potential future litigation from local communities carry significant brand risk.

"The idea that oil sands will enhance energy security is delusional," said Andrew Dlugolecki, Director of Andlug Consulting in the UK. "Investors should do all they can to challenge this misguided use of shareholders' money, which will make global warming worse, and instead call for a new approach that is based on the reality of climate change."