Carrie Tait, Financial Post Published: Friday, March 19, 2010
Courtesy of Royal Dutch Shell Royal Dutch Shell PLC, under pressure from a small group of shareholders, has responded to critics’ concerns with a report detailing its activity in Albertas oil sands.
Royal Dutch Shell PLC, under pressure from a small group of shareholders, has responded to critics’ concerns with a report detailing its activity in Alberta’s oil sands.
Shell said it published the 17-page report because it shares many of the same environmental and economic worries expressed by the shareholders who are demanding the oil and gas giant provide greater transparency with respect to its operations in northern Alberta.
“All aspects of oil price outlook, oil demand, regulatory framework, cost of CO2 and industry cost structure” are “taken into account when … investment decisions are considered,” Shell said in the easy-to-read document.
“When we assess the economic attractiveness of our major projects we include an expected future price for green house gas emissions (carbon price’) over the full life of the project,” Shell said. “Shell includes the expected carbon price in its economic assessments, which is higher than the current carbon price [of $15 per tonne for every tonne emitted above a certain reduction target] in Alberta, anticipating that potential future greenhouse gas regulation could lead to a higher carbon price.”
Shell expects to pay between US$2-million and US$3-million in Alberta for its carbon emissions in 2009, but did not provide further financial details regarding its carbon price predictions.
The company also talked about reclamation, the process of rebuilding the hills, forests, wetlands, and fens that are torn up as companies mine for bitumen. Shell takes a provision on its balance sheet for this process, booked as land is disturbed and reflecting the discounted value of the expected future costs.
Shell expects to spend between 3% and 5% of operating costs on reclamation, which it considers before starting a project, the report said.
Other financial, environmental, and social concerns were addressed in the online report. Shell’s oil sands operations churned out 78,000 barrels of oil per day in 2009 and it expects that to hit 150,000, or 4% of its total production, in the next few years. Mining is its primarily extraction method.
FairPensions, a British lobby group, rustled up enough shareholder support to get a resolution on the ballot at Shell’s upcoming annual meeting demanding more disclosure. It is almost certain that the resolution will fail.
But despite the resolution’s long odds, FairPensions attracted considerable media attention on both sides of the Atlantic, to the point where a British MP has tabled a resolution in the House of Commons asking the MPs’ pension fund to side with FairPensions.
Shell explicitly said its report is in response to the resolution.
“We’re quite cheered that Shell has taken a look at the resolution and decided it has some merit,” Duncan Exley, a spokesperson for FairPensions, said. “We need to look through [the report]…with our partners” before deciding whether it meets their disclosure demands.
BP PLC is facing the same shareholder resolution.
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