“Many inside the company, including Tony Hayward, had long thought that [John] Browne was distracted by his pet issues of climate change and environmentalism, and by his flirtations with the public spotlight. They thought he had been obsessed with branding the company and lowering its carbon footprint at the expense of BP’s real business, producing and selling oil.” – Abrahm Lustgarden, Run to Failure: BP and the Making of the Deepwater Horizon Disaster (2012), p. 203.
“The world’s carbon budget is finite and running out fast. We need a rapid transition to net zero.” – Bernard Looney. CEO, BP, quoted in Financial Times, February 12, 2020
British Petroleum Company, then BP Amoco, then BP, has had a troubled history since it went political in the 1990. That history deserves revisiting given its latest rebranding effort.
The new buzz phrase is “reimagining energy for people and our planet.” In BP’s words:
Our ambition is to be a net zero company by 2050 or sooner. And to help the world get to net zero. This will mean tackling around 415 million tonnes of emissions – 55 million from our operations and 360 million tonnes from the carbon content of our upstream oil and gas production. Importantly these are absolute reductions, to net zero, which is what the world needs most of all. We are also aiming to cut the carbon intensity of the products we sell by 50% by 2050 or sooner.
Good luck with that. CEO Bernard Looney, who just replaced Bob Dudley, will be 80 years old by 2050. Does he understand energy physics and market signals enough to understand that mineral energies are the basis of modern living? Does he really want to be Beyond Petroleum 2 and John Browne 2?
‘Beyond Petroleum’ BP
BP embarrassed the whole oil and gas industry with multi-year negligence that culminated in the Deepwater Horizon spill of 2010. Back at the time, I ran a series of posts at MasterResource on how John Brown’s “beyond petroleum” put image (“greenwashing”) above actual performance.
A reading of Run to Failure: BP and the Making of the Deepwater Horizon Disaster confirms how second-hander, egotistical John Browne put flash over substance and shaped BP in a contra-capitalist company, defined as a firm that chronically seeks special government favor, practices strategic deceit, and violates the prudential virtues.
A full history of BP viewed through the classical-liberal lens of contra-capitalism would make for a very educational business history. Short of that, this post documents the link between contra-capitalist practices and “market failure” via quotations from Lustgarden’s book.
“The company was changing its slogan to ‘Beyond Petroleum,’ a phrase that emerged from a $200 million focus-group-tested rebranding effort. The change emphasized Browne’s vision of a forward-looking company with a footing in all sorts of climate-friendly energy sources, not just oil” (p. 82).
Comment: Upon purchasing Amoco in 1995, BP bought-out Enron’s half-ownership of Solarex to become the largest solar power company in the world. After Enron declared bankruptcy, BP bought Enron Wind Corporation (formerly Zond Wind Systems). Browne in 1997 broke ranks with the major oil companies to embrace climate alarm and mandatory CO2 reductions.
“All the while, BP continued to invest more in its fossil fuel business than ever before. ‘BP really had a sense of selling itself that was unusual in the oil industry. They were really good at taking about the future,’ says Joseph Pratt, a professor of history…. ‘Without a doubt in forty years inside the oil industry, BP was the smoothest talking oil company I’ve ever seen'” (p. 83).
Comment: Enron was the smooth talker on the other side of the Atlantic, leading on climate change and a new energy future of natural gas, renewables, and energy efficiency. Except for natural gas, the other initiatives were money losers at Enron.
2. Safety Problems Pre-2010
“The cascading series of disasters that plagued BP in 2005–2006 were the sorts of events that could ruin a company. They could no longer be ignored or filed away in a list of unfortunate but isolated events. And they could no longer be explained away to investors and the public as sideshow in the great performance of a corporation steering toward a new energy economy. The disasters had become the story of BP” (p. 203).
Comment: Process analysis. Just like the problems of Enron were really present many years before its demise (a major theme of Enron Ascending: The Forgotten Years), BP’s 2010 disaster was put in motion by a contra-capitalist business leader.
Just imagine if John Browne had used the time and resources BP spent on climate alarmism and ‘beyond petroleum’ on real safety and environmental issues. Just imagine if Enron’s Ken Lay had used the time and resources spent on climate alarmism and forced energy transformation on accounting, risk control, and the real things that promote business sustainability.
Diverted management attention has an opportunity cost. Left environmentalists lobbied and praised BP and Enron for putting form over substance. A few shouted ‘greenwashing’, but most applauded their coveted split within the fossil-fuel industry on climate and energy.
“The notion that BP was beyond petroleum–a responsible industry leader at a crucial moment in history–was in shambles. And within the company, differences of opinion about John Browne’s choices and priorities were widening.
Many inside the company, including Tony Hayward, had long thought that Browne was distracted by his pet issues of climate change and environmentalism, and by his flirtations with the public spotlight. They thought he had been obsessed with branding the company and lowering its carbon footprint at the expense of BP’s real business, producing and selling oil. Now despite Browne’s undeniable accomplishments, there was a sense that they had been proven right” (p. 203).
Comment: Bingo. And Ken Lay was very distracted by the climate issue and trying to be all things to all people to make mighty Enron into everyone favorite company.
3. The Reality (before Deepwater Horizon)
“Creative riffing on John Browne’s forward-thinking slogan ‘Beyond Petroleum’ had taken the form of rebranding BP with names like ‘Beyond Parody,’ ‘Barely Pumping,’ ‘Broken Pipelines,’ ‘Bloated Profits,’ and, in a particularly stinging but accurate headline from the company’s hometown paper, ‘Battered Petroleum'” (p. 191).
Comment: Enron’s expensive branding became known as the “Crooked E” when its reality seeped in in late 2001/early 2002.
A Wiki review of BP’s problems follows:
BP has been directly involved in several major environmental and safety incidents. Among them were the 2005 Texas City Refinery explosion, which caused the death of 15 workers and resulted in a record-setting OSHA fine; Britain’s largest oil spill, the wreck of Torrey Canyon in 1967; and the 2006 Prudhoe Bay oil spill, the largest oil spill on Alaska’s North Slope, which resulted in a US$25 million civil penalty, the largest per-barrel penalty at that time for an oil spill.
And then Deepwater Horizon:
The 2010 Deepwater Horizon oil spill, the largest accidental release of oil into marine waters in history, resulted in severe environmental, health and economic consequences, and serious legal and public relations repercussions for BP.
1.8 million US gallons (43,000 bbl; 6,800 m3) of Corexit oil dispersant were used in the cleanup response, becoming the largest application of such chemicals in US history. The company pleaded guilty to 11 counts of felony manslaughter, two misdemeanors, one felony count of lying to Congress, and agreed to pay more than $4.5 billion in fines and penalties, the largest criminal resolution in US history.
On 2 July 2015, BP and five states announced an $18.7 billion settlement to be used for Clean Water Act penalties and various claims.
BP’s new “zero” campaign is short-term misdirection at the expense of energy reality. It sets the company up for incessant criticism from the anti-energy Left.
If BP wants to exit the oil and gas business, that is one thing. But if not, “Big Promises” BP should get real.