UPDATE 1-BP brushes off investor revolts on tar sands, pay

Thu Apr 15, 2010 11:46am EDT

Related Topics

* 94 percent of investors reject oil sands review

* 91 percent of investors back remuneration report

(Adds details of shareholder votes on oil sands, pay)

By Tom Bergin

LONDON, April 15 (Reuters) - Oil major BP Plc (BP.L) on Thursday easily beat off challenges to a Canadian oil sands project and to its executive pay policy.

Europe's largest oil company by market value said 94 percent of shareholders who voted in advance of the annual meeting rejected a call to review its Sunrise project to squeeze crude from Alberta's bitumen-drenched soil. A group of shareholders including California Public Employees' Retirement System (CalPERS), ethical investor Co-operative Investments and a raft of environmental groups tabled the resolution.

The group includes bodies that oppose oil sands production in principle, because it emits more carbon dioxide than traditional oil production, uses more water and involves greater destruction to the landscape.

However, the resolution questioned the business on economic terms, saying Sunrise could become unprofitable if governments impose new charges for emitting carbon dioxide.

BP directors opposed the resolution, saying the company had already factored in higher CO2 charges.

The oil major also feared that being forced to publish a review of how it decided to invest in Sunrise, a joint venture with Canada's Husky Energy (HSE.TO), could set a dangerous precedent which would complicate future investment decisions.

Weak oil prices in 2009 sent some oil sands producers into the red but crude has since recovered. Market predictions are for prices of over $90/barrel in the coming years, compared with a U.S. crude price of $86/barrel on Thursday.

Shell said this week that new oil sands projects offered good returns at oil prices of $70-$75/barrel.

Few analysts believe CO2 emission charges will be high enough to threaten the profitability of the business in the future.

"We doubt that either the Canadian or U.S. governments will use this mechanism to attack an industry delivering an otherwise low risk oil supply," analysts at Citigroup said in a report published on Wednesday.

A RISK FOR ETHICAL INVESTORS

Oil sands projects could be bad news for ethical investment groups.

The groups are loathe to exclude oil companies from their funds as they can offer good returns, especially in a rising oil price environment.

However, fund managers will find it hard to market funds that hold stakes in companies with oil sands investments, like Shell, and BP, as socially responsible.

London-based BP also faced criticism from some shareholders of its pay policies. Last week, influential corporate government governance body Pirc recommended shareholders vote against the remuneration report.

In the event, over 91 percent of investors who expressed a preference before the AGM, supported the report. Last year, more than a third of investors voted against the report.

Attendees at BP's AGM general represent a small minority of investors and so the votes published by BP reflect the vast majority of those who will express a preference.

BP shares traded up 1.3 percent at 1439 GMT, slightly ahead of a 1.2 percent rise in the STOXX Europe 600 Oil and Gas index .SXEP. (Editing by David Cowell)

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