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Branded a liar... How BP uses the threat of climate change to assist company profitability.
By James Marriott and Greg Muttitt.
"BP Amoco is considering a massive expansion of its renewable energy programme over and above the $250m it has already earmarked to spend over the next five years. In a move that will delight its environmental critics, such as Greenpeace, the oil major plans to approach leading investors to see whether they would support a significant change of tack." The Guardian, 10/5/00, 'BP bows to solar power pressure’.
Selling oil or gas is a tough business. For what you have to sell is a product essentially no different from that of your competitors. It’s not like selling clothing or food and drink, where customers distinguish and favour brands according to taste. Oil and gas companies have to find every possible opportunity to differentiate their product and to build up ‘brand’. And climate change provides just one such opportunity for branding.
Since 1995 when John Browne took over as Chief Executive Officer, BP has branded itself as THE environmental oil and gas company. It has won numerous awards, including the 1999 Earth Day award. Far bolder than the other oil companies, which simply sponsor environmental projects (such as Shell’s Better Britain Campaign), BP now:
1. sells environmental products, such as photovoltaic cells, renewable energy e-commerce and emissions trading consultancy; and
2. portrays itself as an intrinsically environmental company, by being the first oil company to withdraw from the anti-Kyoto Global Climate Coalition, and the first to acknowledge climate change; by taking action to reduce its internal CO2 emissions, and by leading the field in environmental reporting.
The Guardian reported BP's intention to approach investors about the expansion of renewable energies. What might those investors think? According to financial analysts at Merrill Lynch1 , BP Amoco "has transformed itself from a regional, mainly upstream [ie exploration and production] company, to a global energy powerhouse in 2 years".
Yet this transformation has nothing to do with renewable energy. Rather it refers to the expansion of BP’s downstream activities, especially in petrol retailing. This might seem like a risky move for an oil company: with production moving increasingly into 'frontier' areas, where indigenous peoples and fragile ecosystems are threatened, there is the danger of the next big environmental or human rights campaign hitting consumer sales. However, in business it is from risk that money is made. And with BP's environmental branding, it is in a position to gain advantage over its competitors from these threats to the industry's image.
The reality of BP's commitment to renewables can be seen in the figures: its much-trumpeted £750m investment in photovoltaics company Solarex in 1998 amounts to just 0.8 % of its recent oil and gas buying spree: £67 bn spent on Amoco in 1998, £16 bn on ARCO and £1bn on Mobil Europe's downstream assets in 1999, £3bn on Burmah Castrol and £600m on a stake in PetroChina in 2000.
The real shift is not to renewables but to gas. According to Merrill Lynch again: "Perhaps the most dramatic turnaround has been in natural gas... [BP] is now potentially one of the top 3 gas players globally."
Indeed, the Financial Times2 reports that BP's gas output is set to rise FIVEFOLD from 1998 to 2002. Gas is by far the biggest growth market in the energy sector, as countries switch to gas-fired power stations from the more expensive coal, and this trend is encouraged by global liberalisation of the electricity industry. Thus gaining gas extraction assets was the major motivation behind BP's acquisition of ARCO, a deal which has also given the company a key presence in Asia, well-placed for the boom market in China. Branding is really about looking at what you do and ‘selling’ it in an attractive way. Thus John Browne tells us that such emerging economies are "where the cutting edge of the environment issue will be over the next decade. Many of those economies use vast amounts of coal which is heavy in emissions. Our objective is to provide an alternative - a choice - in the form of natural gas which can change the fuel mix and radically reduce the level of emissions"3.
In the UK, virtually the entire gas supply comes from the North Sea, and of that 30% comes from fields operated by BP4. This is not just in your cooker or boiler - it's also in your lightbulb or computer screen, with 29% of electricity now generated in gas-fired power stations.5 Whoever you pay your bills to, a vast chunk of your energy comes from BP. The original political motivation for the 'dash for gas' in the UK was to break the power of the miners, rescuing Britain from the grip of Arthur Scargill. In achieving this, the Tory government in fact delivered us into the hands of John Browne. Its Labour successor saw political capital in promising a 20% reduction in CO2 emissions (more than double its Kyoto commitment) - which it could achieve largely because gas only emits about half as much CO2 as coal6 - in the same way as BP has made climate change capital from its own dash for gas.
BP is a vast capital concern just like any other corporation, be it a bank
or a global grain producer, whose essential function is the reproduction of capital: the generation of profit. Its pursuit of the lead position in the global gas market, and its intention to become the worlds largest PV producer, is driven by the search for profit, not by a concern for the global atmosphere. However, trumpeting a concern for climate change has clearly succeeded in diverting environmental criticisms (as the quote from The Guardian above shows) whilst at the same time setting the company apart from its competitors, making the brand itself a more profitable commodity.
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