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Article

2 Jul 2007

Author:
Mike Scott, Financial Times

Non-financial Risks: Testing times for oil’s biggest names

According to Goldman Sachs, more than 40 per cent of new legacy assets are in high-risk countries. These present challenges including human rights, bribery and corruption, security and the rights of indigenous people. Shell's travails with militants in the Niger Delta show that these issues can be a serious drag on performance. There are ways to deal with these issues – Statoil has provided training in human rights to judges in Venezuela and Nigeria, says Stephanie Maier of the Ethical Investment Research Service. While the largest companies mostly have policies in place for dealing with these issues, smaller companies are operating in high-risk areas such as Africa and Turkmenistan without the scrutiny that faces the supermajors. "We have not seen these risks come home to roost, but one day they will," says [Vicki Bakhshi, oil and gas analyst at F&C]... The other big issue the industry must deal with is its environmental impact; and dealing with climate change has emerged as the main challenge in recent years... The focus on cutting greenhouse gas emissions favours groups such as Gazprom and the UK's BG. They are entirely focused on gas, which is 50 per cent cleaner than oil.