Under Tony Hayward, BP focused on the bottom line. His successor, Robert Dudley, is all about consolidating the company's core business. Low-carbon energy remains the road not taken.
AMID THE ENVIRONMENTAL catastrophe and popular outrage brought about by the Gulf of Mexico oil spill, it is easily forgotten that for a brief time, BP was the most progressive kid on the block. In the late 1990s it accepted a causal relationship between the burning of hydrocarbons and global climate change, at a time when its main competitors were still fighting the science and growing political activity to regulate greenhouse gases tooth and nail.
In its long and colourful history, BP has shed its skin many times. Its earliest precursor, the Anglo-Persian Oil Company (1908-1935), was the first company to extract oil in the Middle East following its discovery in southwest Persia, at Masjed Soleiman, by William Knox D’Arcy, who became the company’s first director. Anglo-Persian Oil became Anglo-Iranian Oil in 1935. It was renamed British Petroleum in 1954, following Iran’s nationalisation of the company’s assets under Mohammad Mosaddegh, and the subsequent coup d’état supported by both British and American secret services. During the 1960s, the company’s operational focus broadened to include the wider Middle East, the North Sea and then Alaska with the discovery of America’s largest oilfield at Prudhoe Bay.
History repeated itself in 1998 when British Petroleum merged with American-based Amoco to form one of the world’s largest publicly traded multinational oil and gas corporations, acquiring competitors Arco and Burmah-Castrol two years later. No longer simply a "British" company, BP Amoco was governed by a board of directors made up of six Americans and six Britons, and was owned by asset management firms such as New York-based Black Rock, the company’s single largest shareholder.
The company was rebranded yet again when chief executive Lord Browne of Madingley shortened its name to "BP" in 2001 and adopted a green, yellow and white sunburst, the Helios, as its trademark logo. A new tagline pointed to new horizons for the company: "Beyond Petroleum".
With billions in funds set aside for a 10-year renewable energies drive, "Beyond Petroleum" was to be more than just rhetoric. It offered the promise of a major energy company able to resist the allure of black gold, open up real business opportunities in the clean-energy sector and help drive the transition to the low-carbon economy of the future. Prime Minister Tony Blair and President Bill Clinton were quick to praise BP for its new approach. Shockwaves could be felt throughout the industry, with sustainability strategies and discussions of climate change popping up among the company's major competitors.
A Return To Basics
Under Hayward and now Robert Dudley, BP has sought to consolidate its core business. As a result it has largely put aside the bold ambition and promise embodied in "Beyond Petroleum" and with it the rich rewards the inevitable transition to the low-carbon economy of the future holds for those who grasp its opportunities early and decisively.
Those heady days now seem a distant memory. When Lord Browne left BP in 2007, so did the new philosophy. His successor, Tony Hayward, quickly went about streamlining operations and focusing on the bottom line.
His return to basics was, first and foremost, a renewed attention to oil and gas projects, such as the pursuit of unconventional oil in the Canadian tar sands. The company and its CEO kept talking the talk on CO2 and climate change but despite increased capacities and sales, BP’s solar, wind and hydrogen businesses did not make significant inroads as part of the company’s overall portfolio. Instead, Hayward oversaw a scaling back of investment in research and development of renewables and the closure of the company’s alternative energy headquarters in London in 2009, a move The Guardian mocked as “back to petroleum.”
From now on, BP would drive down costs and maximise profits in the oil business even if that meant ignoring safety and security advice. The shareholders approved as long as nothing went disastrously wrong. Then came the Gulf spill. As Rolling Stone documented in its June 2010 issue, BP chose to cut corners, using cheap, single-walled piping for the Macondo well at Deepwater Horizon and installing significantly fewer cement spacers than recommended by its subcontractor, Halliburton.
The results of this cavalier attitude are now on display in the marshes, mangroves and estuaries of the Louisiana bayou; in the pocket books of the shareholders, too, many of them retirees with shares in the company. It is ironic that Tony Hayward, who once promised to focus on safety “like a laser” will now best be remembered for his role in the public relations disaster that was BP’s handling of the largest oil spill in history.
The Deepwater Horizon explosion is not an isolated incident. In fact, during the last 10 years there have been thousands of onshore and offshore drilling and pipeline accidents around the world, contaminating surrounding lands and waters on a smaller, though not insignificant, scale. The latest in this series came in mid-July when two crude pipelines exploded near the Chinese harbor city of Dalian. The resulting spill, the exact size of which cannot be independently ascertained, has severely threatened water quality, marine life and the livelihoods of coastal populations in the northwestern Yellow Sea.
The National Petroleum Corporation (CNPC), China’s largest state-owned oil and gas firm, runs the pipelines in question, and may not care much about a temporary setback so long as it does not distract from the overarching national goal of securing a steady oil supply. However, unlike the CNPC, BP does not enjoy the benefits of monopoly and answering to governments unconcerned with dividends. Its many large and small shareholders should be asking themselves how they ever got into such a financially ruinous situation in the first place. As the search for prospects drives corporate ventures ever further out on to the continental shelves and deeper below the ocean, so the costs and risks involved are escalating, making alternative ways of generating energy a lot more profitable by comparison.
BP’s latest plans in the Gulf of Sidra, just off the Libyan coast, are a case in point. The company has invested more in the development of this one site than in any other project to date, and the drilling wells will be even deeper than those in the Gulf of Mexico, at about 5,700 feet below the ocean's surface. There are increasing political risks as well. The Italian government, backed by the EU Commission and other powerful EU member states, may yet succeed in derailing or at least delaying the project. Images of the oil spill are not the only thing that will be playing on their minds: rumours persist that BP was involved in the release of former Libyan intelligence agent Abdel Basset al-Megrahi from a Scottish jail earlier this year, allegedly as part of the Gulf of Sidra exploration deal.
Under Hayward and now Robert Dudley, BP has sought to consolidate its core business. As a result it has largely put aside the bold ambition and promise embodied in "Beyond Petroleum" and with it the rich rewards the inevitable transition to the low-carbon economy of the future holds for those who grasp its opportunities early and decisively. Faced with a record $17 billion loss in the last quarter, the company has opted for more business as usual, rather than the bold change of direction that might help resuscitate its ravaged public image.
Harald Heubaum is a Teaching Fellow in Global Environmental Politics at University College London, and teaches Global Energy and Climate Policy at the School of Oriental and African Studies' Centre for International Studies and Diplomacy (CISD).