BP to continue with tar sands project

Press Association,Holly Williams
Thursday 15 April 2010 17:49 BST

Oil giant BP today signalled it would press on with a controversial Canadian tar sands project despite facing a showdown with environmental campaigners and shareholders.

The blue chip company told investors at its annual meeting in London's Docklands that the oil sands work was crucial in helping meet the world's energy needs over the next 20 years.

It insisted it would make a final decision on whether to finance the joint venture with Canadian counterpart Husky Energy by the end of the year.

BP secured a vote against a special resolution put forward by more than 140 shareholders and backed by celebrities including comedian Alistair McGowan and Radiohead's Thom Yorke, which had demanded that BP reviewed its assumptions on the viability of the oil sands plans.

Nearly 6% of shareholder votes were in support of the vote, while 9.2% abstained.

But BP's chairman Carl-Henric Svanberg said the vote was "not about winning or losing" and sought to assure that the firm would take into account requests for greater transparency.

Several large investors including Co-operative Asset Management took BP to task over the projected profits and environmental impact of the oil sands work.

And there were representatives from affected indigenous Canadian communities at the meeting, who made a plea for a moratorium on further projects on the oil sand fields until further research is conducted into health risks to the local community.

One local resident from Canada said he had seen 30% more levels of cancer in his community, many of them rare types.

BP also faced the wrath of investors over pay plans for senior executives at today's meeting, with nearly 16% of shareholder votes withheld or cast against its remuneration report.

There have been concerns raised over pay policies, which saw chief executive Tony Hayward land a 41% hike in his total pay package last year despite the group seeing a 45% slump in profits.

BP's battle over the oil sands project marks the first of a number expected this year as campaigners step up action over the issue.

Activist protesters staged a "Party at the Pumps" demonstration at the weekend with around 150 environmental activists at a BP petrol station on Shepherd's Bush Green, west London.

Critics say oil sand projects are more expensive and harmful to the environment than traditional exploration.

Other oil firms are also in the firing line, with Royal Dutch Shell due to put the same resolution to a vote at its annual general meeting next month.

Today's resolution was co-ordinated by responsible investment charity FairPensions and Co-operative Asset Management.

Niall O'Shea, head of responsible investing at Co-op Asset Management, said at the meeting: "Oil sands are an expensive business - there's a big question over whether the economy can afford the high price that oil sands require."

"We as a society need to be going in an opposite direction - to a low carbon path," he added.

The campaigners want further disclosures on the projects and their environmental impact, with concerns in particular surrounding BP's strategic assumptions about future oil demand and carbon emissions.

BP defended its Canadian tar sands project as being vital to world energy needs, which it said will rise by up to 50% over the next 20 years.

Mr Svanberg said: "We need to make sure this world is powered.

"It is important that we all find ways to a better lower carbon society, but we must always do the job that everyone expects of us."

BP also claimed that it is taking action to mitigate some of the harmful environmental effects and emissions from the oil sands.

The group was likewise put on the defensive over pay for top bosses after lobby groups PIRC, the pension fund consultant, and the Association of British Insurers (ABI) both raised concerns.

BP largely kept salaries on hold in 2009, but the firm's recent annual report revealed that Mr Hayward took home £4 million in salary, cash bonus and share awards last year, up from £2.85 million in 2008.

However, the firm reported a steep fall in profits in 2009, down 45% to 13.96 billion US dollars (£9.2 billion).

Shareholders questioned BP over the level of pay and the possibility of future clawbacks.

In response, the head of BP's remuneration committee DeAnne Julius argued that the group's annual bonus targets were all exceeded when the effect of volatile oil price movements on financial performance were stripped out.

However, BP had a further bruising encounter with shareholders over its plans to renew the senior executive long-term incentive scheme, with as many as 7% of shareholder votes cast against.

Last year the group also faced a humiliating investor blow, when around 38% of votes were made against its remuneration report.

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