Daily Times (Farmington, N.M.)  [Printer-friendly version]
March 13, 2006


Energy security, climate change, peak oil and industry profits are hot
topics and the subject of popular myths.

Leading the list of popular mythology is the recent film "Syriana,"
which, according to BP CEO Lord John Browne, may have earned Oscar
nominations but wouldn't earn a nomination for absolute truth.

Speaking Feb. 15 at International Petroleum Week in London, Browne
said the film is entertaining fiction and will shape what some people
think about the oil industry, but it only serves to add to the
mythology "the cloud of misunderstanding" through which the public and
political leaders see the industry. Unfortunately, the film is only
one of several myths about the industry that, while not as dramatic,
can be just as damaging since they are taken too seriously by too many

The first myth is a popular belief that oil prices are the result of a
conscious choice by the industry. This myth suggests that companies do
not invest sufficiently to meet the growing demands of the world, but
instead extract huge windfall profits and exploit a vulnerable

The reality is very different, said Browne. In the five years ending
in 2004, more than $550 billion was invested in exploration,
development and production of oil and natural gas by the world's top
50 private energy companies. When 2005 investments are counted, that
total will likely increase by $100 billion. Production in non-OPEC
countries has risen by 3.1 million barrels a day over the same period,
enough to meet nearly two-thirds of global demand growth.

Much of that investment has come in new developments, including the
Caspian, Russia and Angola, and established fields like the Gulf of
Mexico and the North Sea.

Yet the myth of under investment persists, making the reality more
difficult to see. Browne then noted that a second, related myth holds
that the industry simply pockets its extra profits. The reality is
that companies reinvest in securing tomorrow's energy and return the
rest to shareholders. In BP's case, the company reinvested $13.9
billion of $26.7 billion in operating cash it generated a year ago and
returned $19.2 billion to shareholders in the form of dividends and

In addition to investors, such shareholder returns support people who
rely on pensions and those saving for pensions. So the myth that oil
companies simply pocket the extra income doesn't stand up to reality.

Another myth heard for some time now is that the industry doesn't care
about the environment. According to this fable, the industry pollutes
at will, resists attempts to force controls on it and blithely leaves
the costs of cleaning up to others, or worse, to another generation.

"Perhaps that was once the reality," said Browne, "but it isn't now."

As the industry continues to make tremendous strides in improving the
quality and performance of its products, the improvements in air
quality compared to a generation ago is apparent and measurable. And
this is while the industry confronts the impact of a global increase
in vehicle use, a challenging proposition.

The bigger challenge is how the industry faces climate change. Many
companies, including BP, have accepted the precautionary principle
that states while the science of climate change isn't certain, the
mounting evidence cannot be ignored. "We can't afford to wait for
certainty," said Browne.

Companies have begun to face this challenge by reducing their own
emissions and by helping their customers do the same. However, what's
been done so far isn't sufficient, Browne said. Emissions, tied to
economic growth, are still rising and so are the risks. The challenge
is in the fact that the world's prosperity and its use of hydrocarbons
are inseparable.

Another, more recent, myth says that the world is running out of oil
and gas and "we are walking towards the edge of the cliff," said
Browne. "The idea that oil is running out is simply untrue. There is
no physical shortage of oil or gas."

In reality, the world's base of oil and gas is strong and the amount
that can be recovered is constantly being expanded as technology

The other side of the coin, however, is the myth that says since there
is an ample resource base, there is no need for concern. The reality
is that much of the oil and gas yet to be recovered is controlled by
governments and not private companies. Often, these governments have
their own interests, many of which don't align with the interests of
energy consumers.

These conflicting interests represent "the next great challenge facing
the industry," said Browne. Companies will need new approaches to
energy development if confidence in energy security is to be restored.
A first step will be continued investment in all segments of the
business that are open to investment.

Ultimately, the challenge facing the industry is how to provide clean,
reasonably priced energy that is low in carbon and can be supplied to
an open market, free of the risks of political interference.

To meet that challenge, the industry is well equipped, said Browne. It
has the financial strength, a proven ability to adapt and adjust to
changing circumstances, a heritage of technology and creativity, and
the global reach needed to match supply with demand.

"We're at a point of great change in this industry," said Browne.
"Demand is growing, but we have to meet that demand in different ways
from different sources."

And while change is exciting, it may be no match for the excitement of
a film such as "Syriana," said Browne. However, it is because we are
leaving such myths behind that such change is exciting. In this case,
he says, the drama is real.

For more information or a full text version of Lord Browne's speech,
contact Dan Larson, BP Public Affairs, Durango, at 970-247-6817.