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

Unconventionals "could be to the oil industry what sub-prime lending was to the banking sector"

Feature story - September 15, 2008
A new report by Greenpeace UK was released internationally today, warning of increasing financial risk for UK oil giants BP and Shell, who have invested heavily in the Alberta tar sands.

BP and Shell: Rising Risks in Tar Sands Developments

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'sbecoming clear that they're a risk to the bottom line as well," saidMike Hudema, Greenpeace tar sands campaigner. "Albertans should beaware of the monstrous economic risks that their government is takingon their behalf."

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

Download the Report

"This report sets the record straight about a dead-end strategy which oilmajors are using to delay the inevitable- a move to carbon-free transport.The idea that oil sands will enhance energy security is delusional.Investors should do all they can to challenge this misguided use ofshareholders' money, which will make global warming worse, and instead callfor a new approach that is based on the reality of climate change."

- Andrew Dlugolecki,

Director of Andlug Consulting

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

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

Acute labour shortages and the rising cost of delivering gas to thetar 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 thefuture, as international climate change regulations are strengthened atCopenhagen 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 isdelusional," said Andrew Dlugolecki, Director of Andlug Consulting inthe UK. "Investors should do all they can to challenge this misguideduse of shareholders' money, which will make global warming worse, andinstead call for a new approach that is based on the reality of climatechange."