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Roula Khalaf, Editor of the FT, selects her favorite stories in this weekly newspaper.
Donald Trump’s inauguration speech as US president this week included a reference to fossil fuels and “liquid gold under our feet”. Despite BP’s huge oil and gas operations in Texas and the Gulf of Mexico (or America), you have to dig deep to find gold in its deposits.
UK company now paths other large investor-owned companies by market value: not only a sixth of the value of ExxonMobil but less than half of the old Anglo-Dutch Shell. It published last week it was cutting 4,700 jobs in a renewed effort to become “a simpler, more focused, higher-value company”.
But BP has made many announcements about its future over the years and has a track record of disappointment. It also applies to several top executives, the latest being Murray Auchincloss, who recently had to do so. postpone a long-awaited policy update for investors next month to revive the medical industry.
Auchincloss succeeded Bernard Looney, who was present shot in 2023 amid allegations of misconduct regarding his past relationships with colleagues. “It’s almost Shakespearean. This company has a lot of stars,” according to one BP expert. It has certainly experienced a series of unfortunate events as it tries to please investors and respond to climate change.
The worst disruption was the Deepwater Horizon oil spill in 2010, which killed 11 workers, polluted the Gulf of Mexico and forced it to sell assets up to a $65bn bill. The company took a long time to recover and never had: it still has a total debt of $24bn and only. accepted the sixth stage in the Gulf last year, in the field it first received in 2006.
Then came Looney’s promise five years ago that BP would cut oil and gas production by 40 percent by 2030, and would “show the power of people and our planet”. This was more rhetoric than substance and BP has backed away ever since, as high interest is paid to its vision of being able to build wind farms cheaply.
The kicker was Vladimir Putin’s all-out invasion of Ukraine in 2022, which forced BP to divest its minority stake in Russian oil company Rosneft for $25bn. Having made a lot of money in the mid-2000s from TNK-BP, its first joint venture with a group of oligarchs, it was eventually fired. Like others, Russia took it by surprise.
But companies make their own fortunes, and BP cannot claim to be unlucky. The thread running through its recent history is its great sense of ambition and purpose, which transcends the power to implement projects. While ExxonMobil sticks to dealing with the world as it is, BP tends to think about wishes.
This goes back to Lord John Browne, who transformed the company as CEO by acquiring Amoco and Arco in the United States and striking the TNK-BP deal. He also brought a lot of wisdom to the strategy, including the proven view that BP would “go beyond petroleum”. The slogan didn’t last but its legacy is that every BP leader aspires to a vision.
BP is not a cowboy outfit. Its operations are generally well-regulated, although Deepwater Horizon is running out of time, and requires strict compliance. But it has a greater intelligence than natural intelligence (“There are a lot of smart people there,” says an observer, not meaning it entirely as a compliment). One calls it “more like a country than a business”, which lacks the strong profit-making process of rivals.
Its commitment to decarbonise was prompted by public and government pressure after the 2016 Paris agreement to limit global warming. It also hopes to attract investment from ESG funds and benefit from the financial revolution. But that failed and he did not act as quickly as Shell in to change course. It is suffering from bad financial results, administrative upheavals and lack of strategic decision-making.
BP now faces a world in which Trump tells oil companies to “wall, baby, drill” and pulls the US out of the Paris accord. Meanwhile, it has been accused by Greenpeace of washing the plants for not coming down fast enough. If the last few years prove anything, it is that it is impossible to please both sides, especially as a power company that has its office outside the US.
Three months before Deepwater Horizon, BP’s market value in a short time of Shell but is now far behind. There will be many bankers wondering if they can fix a merger or takeover. If BP wants to stand up for itself, it has to show investors that it can make things happen, rather than looking to the future. There is such a thing as being too smart.
