“On the 15th anniversary of the BP blowout, the real takeaway is that oil companies that think they are ‘beyond petroleum’ are value destroyers for shareholders and for the environment.”
Every April commemorates BP’s Deepwater Horizon oil spill (April 2010). To the anti-energy Left, Deepwater Horizon is the epitome of oil-gone-bad, coming some 21 years after the Exxon Valdez oil spill. It was not supposed to happen again, but ….
The sad facts of Deepwater Horizon will forever remain; the multiple failures behind the seafloor accident meticulously documented. But a paradox remains. Mighty BP, captained by John Browne, the leading “environmentalist” of the petroleum industry, created a corporate culture that resulted in lax safety and environmental protocols. By saving about $5 million out of $100+ million in drilling costs, the company ended up paying out in excess of $60 billion.
At MasterResource, I addressed the irony, the paradox, in terms of global warming as the great environmental distraction. Greenwashing and political correctness resulted in the “green” company being the worst. Ditto for Ken Lay and Enron on the natural gas side, another story of a postmodern corporation putting sizzle before steak, hat before cattle.
These posts covered the subtle lessons of BP and Enron.
BP Fools the “Socially Responsible” Investors (‘Green’ Enron did too)
They Loved BP and Enron: Climate Alarmism as the Great Environmental Distraction (Part I: Worldwatch Institute quotations)
BP’s ‘Beyond Petroleum’: Climate Alarmism as the Great Environmental Distraction (Part II: Why the ‘greenwashing’?)
Harvard Business Review Article: BP as Environmental Role Model (Part III on global warming as the great environmental distraction)
Opportunity Cost
The time, money, and focus that go in one direction do not go in another. The most highly valuable foregone alternative is the opportunity cost to the chosen action. In terms of the foregone, the results can be spectacularly bad. As I wrote in the aftermath of the BP spill:
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.
Browne resigned in 2007, but his successor, Tony Hayward, might have had inherited a coporate culture to put safety first. Hayward himself was a victim of Deepwater Horizon, replaced by Bob Dudley. And the bad management, trying to appease the enemies of BP’s basic business, would fail.
Two Companies, Similar Result
As I added at the time:
BP might still have a capitalization of $150 billion and not face a potential worst-case scenario of bankruptcy and ruin. And more importantly, the U.S. Gulf would not be in an environmental crisis.
And another example, Enron:
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. (Lay was a big Christopher Flavin/Worldwatch fan too.)
The lesson:
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 ironic conclusion:
… fake environmentalism driving out real environmentalism. Climate and energy reality, anyone?
On the 15th anniversary of the BP blowout, the real takeaway is that oil companies that think they are “beyond petroleum” are value destroyers for shareholders and for the environment.
———–
BP Update: Wounded from environmental torts, BP continued down the EU/UK “green” path of wind and solar. But bad economics, even with government favor, penalized stockholders, and the Browne-remade company eventually, belatedly, reversed course.
“BP slashed planned investment in renewable energy,” reported Reuters earlier this year, “and said on Wednesday it would increase annual oil and gas spending to $10 billion, in a major strategy shift aimed at boosting earnings and investor confidence.”
Author Arunima Kuman explained:
The oil major, which has underperformed peers like Shell and Exxon has come under increasing pressure to change strategy after news U.S. activist investor Elliott Investment Management has built a 5% stake in the company.
BP cut planned annual investment in renewable energy businesses by more than $5 billion, from its previous forecast, to between $1.5 billion and $2 billion per year. It now aims to grow oil and gas production to between 2.3 million and 2.5 million barrels of oil equivalent per day in 2030. It pumped 2.36 million oil equivalent per day in 2024.
BP was following a trend:
It is the latest big energy company to change its position in response to the need to lower carbon emissions and curb climate change, returning the focus to oil and gas.
==========
And most recently, according to Reuters:
Elliott has met with more than 20 investors who are among BP’s largest active shareholders, the source said.
Reuters reported in March that Elliott had discussed the need for deeper spending and cost cuts and potential leadership changes with other BP shareholders…. Elliott also suggests that BP divest its solar and offshore wind power businesses, the source said, adding that Elliott believes the broader executive team around CEO Murray Auchincloss has underperformed and has not been held accountable.
The post Deepwater Horizon at 15: Remember “Beyond Petroleum” BP appeared first on Master Resource.
via Master Resource
https://ift.tt/zIdGJDw
April 30, 2025 at 01:08AM
