About Stuart Hampton

Led by former CEO Lord Browne, BP launched a $200 million public relations campaign (conducted by Ogilvy & Mather) in 2000 to rebrand the oil and gas behemoth as an environmentally sensitive and responsive energy company. The Big Oil giant’s corporate brand became an earth-friendly green and yellow logo in the shape of a sunflower, and the message about the company became BP: Beyond Petroleum.

A 2008 Adweek article points out that BP’s advertising strategy has worked. It reported that in a Landor “ImagePower Green Brands” Survey conducted in early 2007 BP was seen as more green (21%) than its Big Oil peer brands Shell (15%), Chevron (13%), ExxonMobil (11%), and Texaco (part of Chevron, 9%). BP also led the survey of companies that had “become more green” in the last five years, with some 49% of consumers familiar with the brands concluding that BP had done so (compared to Shell’s 36% and Exxon Mobil’s 31%).

But is BP really walking the clean energy walk or just trying to assuage a growing unease among Western consumers about Big Oil’s traditional products and practices and their deleterious effects on global warming and pollution, with a thin veneer of clean energy initiatives, aka greenwashing?

Here are some pros:

• In 1997 the company was the first to acknowledge the potential link between carbon emission and global warming, and later that year resigned from the anti-global warming business lobby, the Global Climate Coalition.
• In 1999 it acquired solar power pioneer Solarex (now BP Solar International) for $45 million.
• In 2005 it formed BP Alternative Energy and committed to spend $1.8 billion over three years in developing alternative and renewable energies.

And some cons:

• In 2005 an explosion at BP’s refinery in Texas City killed 15 workers. The US Chemical Safety Board’s report in 2007 blamed BP for the “organizational and safety deficiencies at all levels” that led to the disaster.
• In 2006 corroded pipelines broke at its Prudhoe Bay Field in Alaska, leaving a record 201,000-gallon oil spill and forcing the company to partially shut down the field. (A similar, smaller problem occurred in 2008).
• In late 2007 the company moved into the development of Canadian Oil Sands (perhaps the dirtiest of all oil sources) with Husky Energy.

In its defense, BP does not claim to be Beyond Petroleum yet. One of its ads reads:

“We’ve invested $28 billion in the last five years in US energy supplies … and $500 million over the next 10 years to develop advanced biofuels. It’s a start.”

Current CEO Tony Hayward took over from Browne in 2007. Early this year he hinted that he might spin off the renewables unit (valued at up to $7 billion). In July, however, he committed to keeping and growing the clean technologies businesses as part of BP.

Authentic champion of green energy or a traditional Big Oil company with a green wash?

You decide.

What’s your carbon footprint?

Exxon Mobil’s top executive gave a rare TV interview on ABC News in prime time. Was he looking for a little peace, love, and understanding?

Exxon Mobil is the 800-pound gorilla in the muscular band of Big Oil (BP, Royal Dutch Shell, ConocoPhillips, Chevron, and their ilk). It is the biggest company in the world in terms of market capitalization ($501 billion as of last April) and has recently capped years of record-breaking financial reports by posting a quarterly profit of $11.7 billion. But like King Kong, Exxon Mobil is arguably more feared and reviled than it is loved. Take this Barack Obama quote for instance:

Perhaps the only thing more outrageous than Exxon Mobil making record profits while Americans are paying record prices at the pump is the fact that Senator McCain has proposed giving them an additional $1.2 billion tax break.

Not much love there. (Even though Exxon Mobil’s profit margins, like those of its peers, are about 8%, slightly below average for S&P 500 companies).

But it is not just the Democrats needling a pain point — Exxon Mobil reaping eye-popping profits, in dollar terms, while consumers suffer record high gas prices — that has given the company a black eye, the company has a history of bad public relations dating back decades.

It is responsible for the Exxon Valdez disaster. Oil tanker Exxon Valdez spilled some 11 million gallons of oil into Alaska’s Prince William Sound in 1989. Exxon Mobil spent billions on the cleanup, and in 1994 a federal jury in Alaska ordered the company to pay $5.3 billion in punitive damages to fishermen and others affected by the spill. (Exxon Mobil appealed, and in 2001 the jury award was reduced.)

Former chairman and CEO Lee Raymond was an outspoken critic of the theory  of global warming and the Kyoto Agreement. In the 1990s and the early 2000s (until his retirement in 2005) he kept Exxon Mobil focused squarely on oil and gas exploration and production (and some coal production), even while some of its peers, most notably BP (Beyond Petroleum) and Royal Dutch Shell, began to invest heavily in solar power and other renewables.

Raymond’s successor, Rex Tillerson, gave a rare interview to ABC’s Charlie Gibson earlier this month. Was this a public relations surge, aimed at winning the hearts and minds of the American consumers with company initiatives to lower gas prices and of environmentalists with new initiatives to develop green energy? Hardly. Although Exxon Mobil is now experimenting with renewable energy, Tillerson’s comments seemed to reflect Raymond’s blunt, stick-to-our-knitting tone. When asked why only a small percentage of funds were invested in developing alternative energy sources compared to the vast amount invested in stock buybacks for company shareholders, his reply was, “We haven’t found an alternative to invest in that makes a lot of sense for us.”

His position on securing energy independence for the US?

“I’m not sure that it’s even desirable for the United States to pursue that as a goal. … Our country’s economy is so interdependent with the rest of the world in so many areas of, not just commodities, but capital markets. … So I’m not sure why we would view energy any differently than the way we view the rest of our economy.”

Hey, he is being consistent. Maybe, when you are the 800-pound gorilla, you just don’t need the love.

“Drill here and drill now” is the mantra of Republican John McCain’s presidential campaign when its comes to addressing the high oil prices that have had US motorists paying more than $4 a gallon at the gas pump this summer. And the polls seem to bear out the attractiveness of McCain’s position (reflecting a 2008 conversion from being against offshore drilling to being for it), with a July Gallup poll reporting that 57% of those polled favored new offshore drilling while 41% were against it. These results were enough for the Democratic presidential candidate Barack Obama to change his tune on offshore drilling. Formerly also in favor of a moratorium on drilling, he recently announced a willingness to entertain new drilling as part of an overall energy package that supported the development of alternative energy as well.

But is new offshore drilling the answer to high gas prices? The answer is, no, at least not in terms of making a short term impact on oil prices. Simply put, it takes too long and does too little. Permits, initial surveys, exploratory drilling, and the usual trial and error of oil exploration places new production of relatively small quantities of oil at least a decade away.

A little context. According to the Mineral Management Service, the Outer Continental Shelf of the Pacific Coast, the Gulf of Mexico, and the Atlantic Seaboard contains about 574 million acres (or 85% of the total acreage) that are off-limits to drilling. The US Congress imposed this moratorium on offshore drilling in 1981, more than a decade after an offshore drilling rig accident caused 3 million gallons of oil to spill, covering 35 miles of pristine coastline near Santa Barbara, California with a thick layer of crude.

Environmentalists, tourism advocates, and other critics of offshore drilling argue that the risks of oil spills and the subsequent contamination of coastlines would not only harm the environment severely but would decimate the multibillion dollar tourism industries in California and Florida. Even without the potential for spills and even though the bulk of new rigs would be well offshore, the idea that there might be oil rigs within sight of their Pacific or Atlantic shores is a political non-starter in those two populous and tourist-reliant states.

So what is shaping up? A compromise. The US Senate’s bipartisan Gang of Ten is floating an energy plan that would open up new offshore drilling areas (as close as 50 miles offshore) in the Southeast Atlantic and Eastern Gulf of Mexico. The other side of the deal — raising taxes on the big oil companies such as Exxon Mobil, BP, and Royal Dutch Shell.

Florida’s Gulf coast and the Atlantic coastlines of Virginia, the Carolinas, and Georgia are all targeted for the new drilling — if the Senate and the states involved agree to the proposed compromise. So far the proposal has infuriated the partisan zealots on both sides (who want to demonize the other side’s position) and has actually prompted some deep reflection about the energy crisis.

Could an energy compromise actually break out in the white hot heat of a US presidential campaign? Maybe so. The fear of losing office (or not gaining office) is a powerful political mediator.

“Yes, we can” may end up in the same sentence as “drill here and drill now.”

The Arctic is “hot” again. No, really.

In previous centuries, the expeditions of James Cook, John Franklin, William Parry and others held out an (unfulfilled) commercial promise — an ice-free and relatively short sea route through the Arctic (the Northwest Passage) linking the riches of Asia with the markets of Europe.

Today, melting ice caps and rising oil prices have combined to create a new commercial opportunity in the Arctic. A major geological survey has found that the region might hold as much as a fifth of the world’s yet to-be-discovered oil and natural gas reserves. In a major assessment, the U.S. Geological Survey reported last week that the Arctic might have up to 90 billion barrels of undiscovered oil reserves, and 1,670 trillion cubic feet of natural gas. On its face, this is equivalent to 13% of the world’s total undiscovered oil and 30% of its undiscovered natural gas.

Good news for the governments of the  US, Canada, Russia, Norway, and Denmark (through its Greenland dependency) and the numerous oil and gas companies that do business with them. According to Donald Gautier, the chief geologist for this U.S. Geological Survey project (despite a history of contentious territorial disputes) “most of the resources are on the continental shelf in areas already under territorial claims.”

Big Oil already has experience in the Arctic — the development of Alaska’s North Slope in the 1970s brought in such giants as BP, Shell, and ConocoPhillips, all of which currently jointly own and operate the 800-mile long Alyeska Pipeline, which links the oil fields of Prudhoe Bay to the port of Valdez. Russian and Canadian companies have had similar success in exploiting onshore Arctic oil and gas assets in their countries.

The prospect of drilling on the continental shelf in the Arctic raises serious environmental and conservation concerns. Environmentalists fear the addition of industrial activity might help speed the already accelerating melting of sea ice, reinforcing global warming. Conservationists are concerned about the threat of massive drilling to the Arctic’s unique natural systems and wildlife, and the dispruption to the way of life of indigenous peoples.

But the drive for new hydrocarbon sources is strong, and the Arctic has already proven its potential. In the past several decades, more than 400 fields have been discovered in the Arctic, with reserves of more than 1,100 trillion cubic feet of natural gas and 40 billion barrels of oil (or about 10% of the planet’s conventional oil and gas resources).

However, the Arctic is a long way from civilization and new fields may take a decade or more of expensive infrastructure creation to get the oil to market. Ditto the Northwest Passage. Captain Cook’s dream may now actually be a reality. (Last year, the ice-free Northwest Passage across the top of Canada was navigable by large ships for the first time). But with no nearby infrastructure (communications networks, power grids, ports, etc) the viability of a new shipping route, like the commercial availablity of new Arctic oil,  is still many years away.

In Stanley Kubrick’s landmark movie Dr. Strangelove, Slim Pickens (as Major T.J. “King” Kong) took a memorable ride astride a nuclear bomb, cowboy hat in hand, triggering an atomic Armageddon. By contrast, another “cowboy” named Pickens, oilman T. Boone, is seeking to avoid a slow motion energy Armageddon in the US, by getting astride America’s future energy policy.

Octogenarian multibillionaire T. Boone Pickens has come up with The Pickens Plan, a bold move to address America’s dependence on foreign oil. The former Phillips (now ConocoPhillips) employee became one of the first independent oil operators (through his Mesa Petroleum company) to grow an oil business through the acquisition of much larger companies (rather than through the old-fashioned drill-bit method). By the 1980s, he had achieved a reputation as a voracious corporate raider. Successful takeover bids included Hugoton Production Company, Pioneer Petroleum, and a large slice of Tenneco. Unsuccessful bids included Gulf Oil, Phillips Petroleum, and Unocal. He moved into hedge funds in 1997 founding BP Capital Management (then known as BP Energy Fund). BP Capital Management operates hedge funds Capital Commodity and Capital Equity, both of which invest heavily in oil and natural gas.

For those who only know T. Boone as an oilman, the opening lines of The Pickens Plan may come as a shock:

“America is in a hole and it’s getting deeper every day. We import 70% of our oil at a cost of $700 billion a year — four times the cost of the Iraq war.

I’ve been an oilman all my life and this is one emergency we can’t drill our way out of. But if we create a new renewable energy network, we can break our addiction to foreign oil.”

His 10 year plan, in essence, takes the 20% of electrical power that uses natural gas as its primary source and replaces it with wind energy. The natural gas that is freed from power generation then becomes primarily a transportation fuel source, supplying a new generation of natural gas-powered automobiles. In addition to reducing the US’ dependence on foreign oil by more than a third, natural gas is a cleaner burning fuel, and the US and Canada has it in abundance.

But some critics see slim pickins in The Pickens Plan:

• The $1 trillion price tag to build a massive new transmission infrastructure to tie the turbines to the national power grid has electrical power groups baulking. And what about those hot summer days when the grid is under stress and the wind does not blow?

• On the natural gas side, the premise of cheap natural gas prices is a shaky one at best. In addition, natural gas automobile engines burn gas less efficiently than the power plants, so why make the shift?

• T. Boone Pickens’ vision of the future is shaped by his own self interest. He has been investing heavily in wind power, and buying up water rights in many of the areas where the new wind power grids will be developed — the Great Plains. (Always hedging his bets, Pickens will be able to buy and sell water rights when that commodity become even scarcer than it is today). He plans a 4,000 MW wind farm, the world’s largest, in Pampa in the Texas Panhandle.

My take on The Pickens Plan?

For introducing a plan that cuts US dependence on foreign oil by 38% in 10 years, and for triggering a serious national discussion on energy policy on the eve of a US Presidential election, Pickens deserves much credit.

I see rich pickins in The Pickens Plan.