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Industry Must Fix Its Image

Browne Challenges Perceptions
BP Amoco's chairman Sir John Browne, as the keynote speaker of a special session in Birmingham on the future of oil and gas, recognized a past of achievements and a future of challenges.

The future includes one particular challenge the petroleum industry has failed to overcome in the past -- "the way the world perceives this industry."

"At the moment there is still a caricature view of who we are and what we do," he said. "In that caricature, the industry is dirty, old fashioned, arrogant and unprincipled. For many people we are no more than a necessary evil."

However, Browne, who became chairman of BP in 1995, sees an opportunity to change our image after some extensive public opinion samplings over the past year.

Browne, lauded in July by Fortune magazine for "taking BP into the big leagues" with the $57 billion to buy Amoco and the $27 billion in April to buy Arco, said "there is distrust and skepticism -- and a very large number of people who don't want their children to end up working for an oil company.

"In Europe, people tend to believe that large companies have too much power, and need to be brought under tight regulation," Browne said, "particularly when it comes to the environment.

"In the U.S., in contrast, many people see the potential of business to deliver technical solutions to the problems that society faces, giving even large companies the benefit of the doubt."

Browne said that 87 percent of the people in the United Kingdom and 91 percent of those polled in the United States believe energy is something that makes progress possible.

"People do recognize the link between energy and progress," he said. "And the potential to change the caricature is there."

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BP Amoco's chairman Sir John Browne, as the keynote speaker of a special session in Birmingham on the future of oil and gas, recognized a past of achievements and a future of challenges.

The future includes one particular challenge the petroleum industry has failed to overcome in the past -- "the way the world perceives this industry."

"At the moment there is still a caricature view of who we are and what we do," he said. "In that caricature, the industry is dirty, old fashioned, arrogant and unprincipled. For many people we are no more than a necessary evil."

However, Browne, who became chairman of BP in 1995, sees an opportunity to change our image after some extensive public opinion samplings over the past year.

Browne, lauded in July by Fortune magazine for "taking BP into the big leagues" with the $57 billion to buy Amoco and the $27 billion in April to buy Arco, said "there is distrust and skepticism -- and a very large number of people who don't want their children to end up working for an oil company.

"In Europe, people tend to believe that large companies have too much power, and need to be brought under tight regulation," Browne said, "particularly when it comes to the environment.

"In the U.S., in contrast, many people see the potential of business to deliver technical solutions to the problems that society faces, giving even large companies the benefit of the doubt."

Browne said that 87 percent of the people in the United Kingdom and 91 percent of those polled in the United States believe energy is something that makes progress possible.

"People do recognize the link between energy and progress," he said. "And the potential to change the caricature is there."

However, the obstacles to overcome include this example: When asked, What do you most associated with the word energy -- progress, or pollution? In the U.K., 51 percent said progress and 42 percent pollution; in the U.S., 67 percent thought of "progress" and 28 percent "pollution."

"Our challenge is to demonstrate the link to progress and to eliminate the link to pollution," Browne said.

"Of course, that linkage isn't simple, but I think people recognize that if you go back over the last century, there's been a strong, positive correlation between the ability to access and use energy and in living standards that ordinary people have enjoyed."

Browne, who has been roundly congratulated -- particularly outside the oil industry -- for his stance of recognizing global climate change needs to be taken seriously, said "We have to meet the challenge of ensuring that we do no damage to the environment at any point in the chain of our activity -- from exploration to consumption."

Geologists were told that caution for the environment is especially critical since consumption is going to rise "as it must if we are going to meet the needs of a growing population."

Browne noted that population growth -- especially in Asia -- will be a major driving force, and "that means that this will be a growth business for at least the lifetime of anyone in this room."

He also said the growth will be different in character from that of the past century, as the energy markets of the world shift to the South and East.

"It will come as gas displaces coal in generating electricity," Browne said, "and as both oil and gas supply the simple aspirations to enjoy heat, light and mobility in countries where such things are still luxuries."

Looking to cost-saving technology to provide the wherewithal to adjust to an increasingly gas-fueled future, Browne cited three areas of particular interest:

  • The advances in the conversion of gas to liquids at room temperatures, which we're now going to try to make use of to make the development of Alaska's huge gas resources commercially viable.
  • The breakthroughs in LNG technology, which are making it possible to bring gas to European markets from places such as Trinidad.
  • The improvement in recovery rates from existing fields.

Browne also cited four "defining characteristics of the industry of the 20th century.

  1. Growth. World consumption is about 75 million BOE a day -- almost as much as was used in the whole of the year 1900, with regional distribution of consumption growth shifting from a mainly European and U.S. center to emerging markets.

  2. Resilience. "The oil price has varied in real terms by a factor of five over the last 25 years and by a factor of more than two in just the last two years alone," Browne said.

    He also cited "continuing conflict of the distribution of economic rent -- leading to expropriation and very levels of taxation."

    Meanwhile, the industry "continues to invest tens of billions of dollars on very long term projects every year. It learning how to manage the risks of venturing into new areas of the world that have been opened up by political change."

  3. Technology.

    "I doubt that anyone 100 years ago, even the science fiction writers of the time such as H.G. Wells or Jules Verne, could have dreamt of the things that have been achieved," he said.

    He cited seismic that can "identify subtle variations in reservoir quality and in fluid type, up to five kilometers beneath salt; horizontal drilling to produce over a distance of 10 kilometers; multiflow technology permitting production in waters over two kilometers deep; and turbine technology advances, "which mean that our next gas-fired power station in Wales -- about 150 kilometers from here -- we believe we will achieve 72 percent thermal efficiency in the production of electricity."

  4. Commitment to Progress

    . Browne complimented "an industry that in the American sense always looks for the frontier -- an industry that never stands still and never tolerates complacency or conservatism."

    Recalling when he entered the industry 30 years ago, Browne said "There was public mood of concern about the depletion of resources and a real fear that we would all become dependent on a tiny number of suppliers who would hold the world to ransom.

    "In 1972, the Club of Rome produced its famous report saying oil supplies would exhausted by the 1990s," he recalled. "The reality turned out to be rather different. At the end of 1972, booked worldwide reserves were around 700 billion barrels. Since then we've produced and consumed some 600 billion barrels."

    But at the end of last year, 26 years on, world booked reserves were almost 1.1 trillion barrels, an increase of 56 percent.

    "And the fascinating thing," he added, "is that a third of the reserves added since 1972 have come from outside OPEC."

Browne, who joined BP after graduating with a physics degree from Cambridge University in 1969, toured the meeting's exhibits hall prior to his address to the geologists, noting "this is really quite impressive."

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