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Investors Managing $2.5 Trillion Press Energy Companies to Better Disclose Spill Prevention and Response Plans For Deepwater Wells Worldwide

August 5, 2010

Investors Send Letters to 27 Oil/Gas Companies and 26 Insurance Companies; Seek Responses by Nov. 1

HARRISBURG, Pa., Aug. 5 /PRNewswire-USNewswire/ — In the wake of significant financial losses from the BP oil spill and in response to a proliferation of deepwater offshore drilling worldwide, more than 50 U.S. and other global investors have sent letters to major energy companies asking them to disclose information regarding their risk oversight measures, including spill prevention and response plans, for their own offshore oil operations around the world.

The letters, sent to CEOs at 27 oil and gas companies, were signed by 58 global investors with collective assets totaling more than $2.5 trillion, including the Pennsylvania State Treasurer, New York State Comptroller, California State Treasurer, Florida State Board of Administration and the UK-based Local Authority Pension Fund Authority Forum.

“It is important for all companies involved in subsea deepwater drilling to be open and transparent with investors and stakeholders at this crucial historic moment,” wrote the investors.

“The shareholder harm that has flowed from the BP spill has focused investor attention on governance, compliance and management systems needed to minimize risks associated with deepwater offshore oil and gas development worldwide,” the letter continued. “The BP Gulf of Mexico disaster has also raised concerns about response plans by companies and the industry for dealing with offshore accidents.”

The letters were sent to 27 companies, including the world’s three largest deepwater oil producers – Petrobras, ExxonMobil and Royal Dutch Shell. It was not sent to BP or Anadarko Petroleum, which jointly owned the Deepwater Horizon rig that exploded in April, causing the world’s worst-ever spill that sent nearly five million barrels of oil into the Gulf of Mexico. Investors have seen BP’s stock fall by more than a third since the spill.

“The Deepwater Horizon disaster was a game-changer for shareholders,” said Pennsylvania State Treasurer Rob McCord. “It demonstrated the catastrophic consequences that can result when firms fail to provide essential risk assessment. Information is power – and it helps investors manage risk. Neither public nor private investors can make good decisions without better information that is delivered early and systematically.”

“Would I invest in an offshore drilling company if its disclosure statement revealed that its ‘rapid response’ to a catastrophic oil spill involved the unproven technique of stuffing golf balls, hair clippings and shredded tires down a well? Probably not,” McCord added.

The letter includes questions on five key topics: company investments in spill prevention and response activity, including offshore drilling and spill response capability; spill contingency plans for managing deepwater blowouts; lessons learned from the BP spill, including their position on possible new regulations and more robust enforcement on offshore drilling in the Gulf and elsewhere; possible actions to improve their safety contractor selection and oversight practices; and governance systems for overseeing management of offshore oil and gas operations. Companies are asked to respond by November 1.

Deepwater offshore drilling has become increasingly critical to the global oil industry, accounting for roughly half of new oil discoveries over the last five years. Companies like BP, ExxonMobil and Royal Dutch Shell are especially eager to explore in deep waters because most of the world’s oil land-based reserves are in the hands of state-controlled companies.

Deepwater oil production capacity (2,000 feet or deeper) has tripled since 2000 to five million barrels a day and has the potential to double again by 2015, according to Cambridge Energy Research Associates. There are now 14,000 deepwater wells worldwide.

“The Gulf tragedy provided dramatic evidence that investors and pensioners have high stakes in deepwater oil exploration. In my state alone, the nation’s two largest public employee pension funds have seen the value of their BP holdings plummet by $349 million,” said California State Treasurer Bill Lockyer, who serves as a trustee on the board of CalPERS and CalSTRS, which have a combined $337 billion in assets. “Our message is simple: investors have a right to full disclosure of the risks associated with oil companies’ offshore operations, and the prevention, response and governance measures they have in place to minimize those risks.”

“Investors are rightly raising questions about whether and how the rest of the oil industry is prepared to manage the risks associated with the industry’s move toward increasingly extreme water depths and operating conditions to find oil,” said Andrew Logan, oil program director at Ceres, a leading network of investors and environmental groups which helped organize the investor letters. “The BP disaster demonstrates that the shift to deeper waters comes with a significantly increased risk profile, and that the cost of getting environmental risk management wrong has increased dramatically.”

“Investors are by definition risk takers, but our risks need to be calculated and measured,” said New York State Comptroller Thomas P. DiNapoli, sole fiduciary of the NYS Common Retirement Fund. “Investors have a right to know that our companies are taking all necessary steps to maximize opportunities without sacrificing safety. We believe improved practices and policies to mitigate risk will ultimately improve the bottom line, which is good for all investors.”

A second letter was sent by most of the same investors to 26 insurance companies that provide insurance for offshore drilling activity. The letter asks if insurers are, among other questions: considering adjustments to their overall exposure to offshore oil and gas operations, including possible changes in policy volume; considering changes in their underwriting criteria; supportive of new regulations that would reduce offshore drilling risks.

Swiss Re has estimated that total insured losses for all affected parties from the BP rig explosion and spill could top $3.5 billion – a figure that would surpass the $2.2-$2.5 billion in annual insurance premiums worldwide for oil and gas exploration.

The oil and insurance letters and the investor signatories to each of those letters is available at http://www.ceres.org


    Oil and Gas Companies Receiving Letters:
    Apache
    ATP Oil and Gas
    BG Group plc
    BHP Billiton
    Chevron
    ConocoPhillips
    ENI
    ExxonMobil
    Hess
    Husky
    Maersk
    Marathon
    Murphy
    Newfield
    Nexen
    OGX Petroleo e Gas Participacoes S.A.
    OMV
    Petrobras
    Plains Exploration and Production
    Repsol YPF SA
    Shell
    Statoil
    Suncor
    Talisman
    Total
    Tullow Oil plc
    Woodside Energy Ltd.

    Insurance Companies Receiving Letters:
    ACE
    AIG
    Amlin
    Arch Capital
    Aspen
    AXIS
    Beazley PLC
    Catlin
    Chaucer
    Everest Re
    Flagstone Reinsurance
    Hanover Re
    Hiscox
    Lancashire
    Lloyd's
    Montpelier Re
    Munich Re
    PartnerRe
    RJ Kiln & Co.
    Swiss Re
    Tokyo Marine Holdings (parent of RJ Kiln)
    Transatlantic Re
    Travelers
    Validus Re
    W.R. Berkley
    XL Capital

Pennsylvania Treasurer Rob McCord is committed to increasing the economic security and prosperity of all Pennsylvanians. Before winning the statewide elected job of State Treasurer, McCord was a successful business leader. He is now focused on strengthening the state’s economy, managing investments to get strong returns for taxpayers, and helping to create good jobs and retirement security for Pennsylvanians. To learn more about Treasurer McCord’s initiatives, please visit the Pennsylvania Treasury at www.patreasury.org.

SOURCE Pennsylvania Treasury Department


Source: newswire



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