Yesterday Tony Hayward announced that he is stepping down and Bob Dudley will be the new CEO from October. It's a perfect moment to reinvent BP and invest in renewables and "Beyond Petroleum", the initiative started by Lord Browne.
Bob Dudley has some background experience in solar and wind, so the appointment could be promising.
Even though the Gulf of Mexico leak has stopped (more or less), BP's woes have only started. The estimate of costs is about £20bn and the company is already planning to sell assets worth about that amount in the next year to prop up its balance sheet. With record losses, suspended dividends and uncertainty about its future, there's the additional Damocles sword of a huge appetite for litigation in the sourthern states, where many industries have suffered immense losses. BP can face lawsuits for loss of earnings from people from all walks of life, and until legislators draw a line and cap its liabilities, there will be huge uncertainty about the future of the company and the market is unlikely to react positively to that.
It's unfortunate that BP has been the punchbag of American politicians in the eve of the primaries in November, and Tony Hayward the "ass-to-kick" of choice of president Obama.
A company under such pressure is going to find it much more difficult to turn to the more challenging industry of renewable energy, and is more likely to stay firmly focused on oil and gas, its more profitable area of operation. Now it plans to exploit Canada's tar sands, a massively damaging operation from the environmental point of view, as this operation will result in approximately 3 times the amount of GHG per barrel of oil extracted than by conventional means. It should be deterred from pursuing this and other forms of risky exploitation.
BP briefly flirted with Beyond Petroleum with Lord Browne, but it has only invested £2.6bn in renewables since 2005, and Tony Hayward's reign was characterised by a return to oil, so the company has been firmly anchored in its traditional remit more than ever. BP's own forecast of expenditure in renewables is a mere £5bn by 2015, which is less than 25% of what the Gulf of Mexico spill will cost.
The figures are quite discouraging, but there is room for fundamental change. A turn to renewables will be a good PR coup for BP in the United States and it is likely to help it to cap its oil spill liabilities. BP can take the initiative to spend a further £10bn in renewables by 2015 in exchange of a deal with American legislators to massively reduce the oil spill bill and cap its liabilities vis-a-vis civil lawsuits and the like. The environment would benefit, and it would be a good solution for the company and for the US.
Mikel Susperregi
mikel@carbonica.org