Norwegian Pension Fund asks Statoil for improved shale gas disclosure

NORWAY – The NOK151bn (€18.7bn) Government Pension Fund Norway (GPFN) has asked energy company Statoil to improve reporting on its US shale gas operations.

Melanie Brooks, senior analyst for responsible investment at Folketrygdfondet, the fund’s manager, said that information on how the company manages environmental challenges was vital due to the associated financial risk.

"We need more detailed information in order to properly evaluate the activities and therefore the real risks associated with the shale gas projects," she said. "The reporting needs to be improved, because of the possible effects which the management of such risks has on profitability."

Brooks also said there should be a focus on getting information to all the shareholders.

"We want the markets to have this information to ensure correct valuation of the shares," she said.

However, Brooks said that the comments were not a blanket criticism of information provided by Statoil to its shareholders.

"We've been asking Statoil to develop the same level of reporting for its US shale operations as for its oil sands operations in Canada, which is comprehensive," she said.

The GPFN is one of Statoil's largest single shareholders; as at end-June this year, it owned 3.4% of the company. Its NOK13.4bn-worth holding is the biggest individual investment in the pension fund's equity portfolio.

Last week, Folketrygdfondet published its annual ownership report, which highlighted the risks of "unconventional" oil and gas extraction.

It said such business activity had received considerable attention because of its associated social and environmental challenges.

"Some parties have also raised questions about the profitability of such projects, given the high costs of extraction and uncertainty related to future oil and gas prices, as well as future costs associated with greenhouse gas emissions," it said.

In terms of the shale gas operations, the report's concerns related to the use and recycling of water, methane emissions, the use of chemicals, and gas flaring.

Brooks said Folketrygdfondet had held a number of meetings with Statoil over the past year, and that there had been progress in the provision of information. She expected to see better disclosure related to shale gas operations during 2014.