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Oil Search shareholders reject climate res by 90% at annual meet
Kay Cashman Petroleum News
At Oil Search Ltd.’s annual meeting in Melbourne on April 30, a climate change resolution directing the company to spell out plans to phase out oil and gas operations was rejected by 90% of the votes cast. A renumeration report was likewise voted down by 54% despite the fact the company reduced board and management fees and salaries by 20% for six months following last year’s oil price crash.
Oil Search’s chief executive, Managing Director Keiran Wulff, also told virtual and actual attendees of the meeting that the company, as previously announced, started a divestment process in late March in cooperation with its joint venture partner Repsol SA to offer 15% from Oil Search or 29% jointly in the Pikka project to a potential third partner.
Project operator Oil Search is simultaneously working to ensure it has long-term financing once the project is fully sanctioned, even without a new partner, by engaging in discussions with potential lenders at various commercial banks and funding organizations.
The divestment process is being managed from the United States.
“Given the halving of the capex costs to approximately US$3 billion of which only US$2.4 billion is required to first oil, we are encouraged by the interest shown to date and we expect to be able to finalize project financing arrangements in the second half ahead of an FID,” Wulff said.
According to The Australian Financial Review, national oil companies, U.S. firms and Asian companies have shown keen early interest in buying a slice of Oil Search’s Pikka project, per Wulff.
Two days after Oil Search’s annual meeting, Repsol CEO Josu Imaz confirmed the two companies were “working together” to find a third partner to step into the project, per a Seeking Alpha transcript of Repsol’s Q1 2021 earnings call.
Enviro group behind resolution The Oil Search climate change resolution was proposed by the Australian activist group Market Forces. The group is aligned with environmental organization Friends of the Earth’s Australia chapter. It is trying to shut down fossil fuel production from the inside, working with lenders, investment groups and communities to prevent investment in projects that Market Forces decides would harm the environment and increase global warming.
Launched in January 2013, Market Forces believes that the banks, superannuation funds and governments that “have custody of our money” should use it to “protect not damage our environment.”
Oil Search Chairman of the Board Richard Lee said the company's Pikka oil project on Alaska’s North Slope and its liquefied natural gas projects in Papua New Guinea are aligned with the Paris Agreement to limit global warming to well below 2 degrees C compared to pre-industrial levels. (To achieve this long-term temperature goal, countries that signed the treaty aim to reach global peaking of greenhouse gas emissions to achieve a climate neutral world by mid-century.)
Currently “our assessment is that the demand for LNG and for oil will be material for quite some decades,” Lee said, noting the company’s LNG supply would help in the transition from fossil fuels.
“Fortunately, our assets are low cost, low greenhouse gas intensity and are located strategically very close to major centers of demand that have announced zero carbon commitments by 2050,” Lee said, referring to both Pikka and Papua New Guinea.
Sustainability team key Since establishing a dedicated sustainability team last year Oil Search has been embedding sustainability across the company through a seven-pillar model for action that covers climate, environment, community, health and safety, people, integrity and economic sustainability, Wulff said.
One of the slides he used said Oil Search has been “executing projects identified within a carbon abatement marginal cost curve aimed at prioritizing the activities which will reduce emissions intensity” in its existing operations.
The company has also been designing the Pikka project to be a global leader and model for efficient low emission intensity developments by designing GHG intensity targets agreed on by the joint venture, Wulff said, referring to Oil Search’s arrangement with partner Repsol.
Wulff’s slide also noted that through its sustainability team, which is led by Executive VP Beth White, Oil Search is continuing its “tradition of clearly and transparently reporting” its progress against initiatives through its “comprehensive sustainability report and climate resilience addendum as well as transparency, voluntary principles, basis of preparation disclosures and updated and detailed data center which includes multi-year performance data across social, environment and governance indicators.”
According to a Reuters report, Oil Search and its Australian rivals Woodside Petroleum and Santos Ltd have agreed to non-binding votes on their climate reporting at their 2022 annual meetings.
Voluntary pay measure Lee said “as a voluntary measure, in the spirit of transparency and good governance, we put forward the remuneration report to members for an advisory vote. We understand from your response (rejected down by 54% of the votes cast) that some concerns remain, and the company will take this on board for future consideration.”
Oil Search is listed on the Australian (ASX) and PNG (OSH) security exchanges and its ADRs trade on the US Over the Counter market (OISHY).
- KAY CASHMAN
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