KLP dumps Total. When will the Government Pension Fund follow?
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The Norwegian investor KLP announced 3 June that they have blacklisted the oil company Total from its portfolio due to the company's oil activities offshore Western Sahara. The Norwegian Government's Pension Fund might land on the same conclusion.

Published 05 June 2013

Photo: Total has in 2012-2013 executed comprehensive search activities in Western Sahara together with a Chinese government owned oil company. This photo shows one of the supply boats that participated in the operation. Click on the photo for higher resolution. Free use. 

“KLP is of the opinion that Total's activities on the continental shelf offshore Western Sahara can be linked to a violation of fundamental ethical norms”, says Jeanette Bergan, head of responsible investments in KLP Kapitalforvatning, to Norwegian national broadcaster NRK 3 June. 

The pension fund, which provides pensions for local government employees in Norway, sold their shares amounting to more than 50 million Euros as a result of the decision. The Norwegian Support Committee for Western Sahara welcomes KLP's well-founded decision. 

“It is difficult to find a more cynical operation than this. Total works together with Moroccan authorities in order to rob the natural resources of the territory whilst the area is still being occupied”, says Erik Hagen, director of the Norwegian Support Committee for Western Sahara. 

Hagen says that the exclusion confirms the organization’s impression of KLP as a socially responsible investor and tells that other investors, including the Norwegian Government Pension Fund, will probably follow.

“The decision is clearly in line with other exclusions we have seen from KLP and other investors internationally. Western Sahara is a taboo area for responsible companies and investors. The information about Total's engagement in Western Sahara is only seven months old and we are looking forward to seeing other investors drawing the same conclusion. We are especially eager to hear what the Norwegian Ministry of Finance will do”, says Hagen. 

Norwegian daily Aftenposten has already written about the Norwegian Government Pension Funds huge investments in Total. With over Nok 14 billion invested, the Norwegian Government Pension Fund is one of Total's biggest shareholders. At the same time, the fund has until now shown a through and good practice in throwing out companies engaged in Western Sahara. 

In 2005, the Norwegian Government Pension Funds and several other investors sold their shares in the American oil company Kerr-McGee. This was the first company that the Norwegian Government Pension Fund excluded after having been subject to following ethical guidelines. However, Kerr-McGee was not the only one operating in Western Sahara at that time. Total was operating in Western Sahara on Kerr-McGee's neighboring block in the period 2002 – 2004. Only a few months before the question of Kerr-McGee was considered by the Ministry of Finance in 2004, Total claimed that there were no commercially viable oil potential on the block, and they hence pulled out. If Total had not left Western Sahara in that point of time, the company would already have been thrown out of the Norwegian Government Pension Fund together with Kerr-McGee on the 6th June 2005. 

And also, if the Ministry of Finance uses as long time on the question of Total as they did with Kerr-McGee, Total will be black listed on this forthcoming Thursday, 6th June.

The Norwegian Pension Fund track-record of excluding Kerr-McGee and phosphate companies in Western Sahara makes it difficult to see that they might come to a different conclusion then excluding Total. The Norwegian Support Committee for Western Sahara cannot find a single difference between the license of Kerr-McGee (that lead to them being thrown out of the fund in 2005) and Total. Check out the parallels:

  • Same place. Kerr-McGee and Total had/has licence offshore occupied Western Sahara. 
  • Same licence type. Both Kerr-McGee and Total had so-called reconnaissance agreement, for exploration of the oil potential in the territory. 
  • Almost same length of licences. Both Kerr-McGee and Total entered into 12 months licences when they first entered Western Sahara in 2001. The first agreement were signed in September 2001 were renewed in October 2002 and October 2003. While Total chose to not renew its licence in November 2004, Kerr-McGee continued with renewed licences in October 2004, May 2005 and October 2005. Kerr-McGee terminated their engagement in 2006. Total's new licence, as they came back to the territory 6 December 2011, lasted for 12 months. It was renewed on 6 December 2012. 
    Kerr-McGee's licence at the time they were excluded from the fund was seven months (start date 19 Oct 2004, end date 1 May 2005 - one day after Ministry of Finance sent order to NBIM for divestment of the shares).
  • Same exploration activity. At the time when Kerr-McGee was excluded, the company had (in partnership with Total) carried out seismic surveys on the block, with the help of Norwegian seismic survey company TGS-Nopec. After Total returned to Western Sahara, the French company has carried out extensive 3D surveys from summer 2012 to summer 2013. The exploration were done in partnership with a subsidiary of the Chinese state company CNPC, and has been highly extensive, advanced and expensive. 
  • Probability for future exploration activity. When Kerr-McGee was excluded from the Pension fund in 2005, they had according to the UN, an agreement with «option for future oil contracts». The international organisation Western Sahara Resource Watch has ask Total whether they too have options for future oil contracts. Total has not answered those questions, latest in a letter of 14 May 2013. Total has already renewed and entered into licences in the area several times (first agreement signed in 2001, renewed in 2002 and 2003, and thereafter second agreement in 2011, renewed in 2012). Since Total does not want to discuss its future plans, it is not possible to establish if the company will enter into repeated 12 month licences ever year. The Norwegian Support Committee for Western Sahara sees it in either case as probable that a company that invests this much in seismic surveys also have plans for further work. The Support Committee estimates the value of the seismic study from October to April to be worth 60 million USD. In addition, the company did studies also summer 2012, and April-June 2013. The question of options is not necessarily a prerequisite for the assessment of the Pension Fund's ethical council: The council found in 2005 that such options were not decisive for the Kerr-McGee case, since "the aim of Morocco is clearly exploitation of natural resources in the area", and carrying out such activity is a contribution to those plans. The Pension Fund's ethical guidelines further establishes that companies should be excluded "if there is an unacceptable risk that the company contributes to or is responsible for [...] particularly serious violations of fundamental ethical norms". 
  • Same unethical partner. The licences of Kerr-McGee and Total are issued by the same Moroccan state oil company, ONHYM (former ONAREP). The Ethical Council presented in 2005 a number of arguments why Morocco's plans for oil search are unethical, and concluded that Kerr-McGee's operations constitute "contribution" to these plans and it s "not decisive to this case whether Kerr-McGee has such options". The risk was associated with Kerr-McGee's contribution to the fact that Morocco could continue its oil plans in the occupied territory. Total is, on the other side, the company with the largest licence, by far,in the occupied territory, and without doubt plays a key role in Morocco's aggressive oil program in Western Sahara. The question concerning a fundamentally unethical partner was also underlined by the Ethical Council/Ministry of Finance in a previous case in 2010, when the case was concerning phosphate production. The phosphate assessment concluded tat the activities of the state Moroccan phosphate company in the occupied territories constitute a "particularly serious violations of fundamental ethical norms." The long term clients, on the other side, were excluded from the fund due to their contribution to the state company's breach of norms. 
  • Same explanations from the companies. Total and Kerr-McGee have refused to answer as to whether they have obtained consent from the Saharawis, which according to the UN is a prerequisite for the legality of the activities. All points to the fact that they have not got such consent. This was also confirmed by the investor KLP. The argumentation from the two companies have only been that they do not act illegally. Representatives for the Saharawi people have proested against both engagements. 
  • Finally: The complaint that Kerr-McGee's operations in Western Sahara was sent to the Ministry of Finances on 29 November 2004. The information on Total in Western Sahara was known and sent to the Pension Fund the same date, eight years later, 29 November 2012. The Ministry of Finances announced on 6 June 2005 that they had excluded Kerr-McGee from the fund. In order for the parallel to be complete, Total will have to be excluded from the fund tomorrow, Thursday 6 June 2013, on the day eight years after Kerr-McGee. 

Former Council leader: "Total exclusion case possibly stronger"
The former leader of the Council on Ethics states to KLP that there is possibly a stronger case for excluding Total than excluding Kerr-McGee. The reason is that Morocco signed the UNCLOS in 2007. 

This is how the Kerr-McGee case was handled 
29 November 2004 a letter was sent to the Ministry of Finances, stating that the company Kerr-McGee operated in Western Sahara, thus violating the newly established ethical guidelines for the fund. 4 January 2005, Kerr-McGee sent a letter to the Norwegian Ministry of Finances Per-Kristian Foss that they had heard about the complaint, and asked the Norwegian government to reject it. Read the letter from Kerr-McGee to the Norwegian government

The Ethical Council carried out its assessments during the spring of 2005. The company was approached, and 5 April 2005 Kerr-McGee a letter to Norwegian Bank Investment Management (NBIM) where they say that the Norwegian assessment was wrong. 

Three small weeks later, 29 April 2005, the Ministry of Finances an order to NBIM to exclude the company. Read the letter from the Ministry to NBIM. NBIM got 4 weeks to sell the shares. 

One week after NBIM's expired, 6 June 2005, the Ministry of Finances announced that the company was excluded from the fund. They explained that the operations constituted a "'a particularly serious violation of fundamental ethical norms' e.g. because it may strengthen Morocco's sovereignty claims and thus contribute to undermining the UN peace process". 

Does NBIM work on the Total case? 
The Support Committee has asked NBIM to raise the issue with Total. NBIM sent on 18 December 2012 a letter to the Support Committee where they write that they will not comment clearly on that topic. It is not known if NBIM has raised the Western Sahara case with the company.

If the Ministry of Finances is to maintain their practice from the past, they will exclude Total.

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