After the April 2010 Gulf of Mexico oil spill, BP said it wanted to clean up the mess, pay what it owed, and get on with business. Three years later, you’re at war with plaintiffs’ lawyers. What happened?
It was a terrible accident. And from that time on, we said we would want to step up and make good. We are still committed to make sure that legitimate claimants and people who were true victims of the spill are paid. Immediately after the spill, we set up our own facilities across the Gulf and paid out around $400 million. Then, during the Ken Feinberg settlement process, more than $6 billion was paid out. [BP hired Washington attorney Kenneth Feinberg to oversee claims payments.] And then we made a deal with a plaintiffs’ steering committee to complete the process of paying out to legitimate victims of the spill.
Quite frankly, the results have been really strange. The claims going through a claims facility have resulted in absurd results, and millions of dollars are going out to pay people who suffered, in many cases, no losses from the spill. And this is just not right. I don’t think it’s right for America. We’re a big investor in the United States, and we’ve challenged this really strongly. It’s just not right.
What do you mean it’s not good for America?
Any company that makes in good faith an agreement to respond—and I don’t think there are many companies that have responded more responsibly to an industrial accident—when you make an agreement and you don’t have the faith and the trust that agreement is going to be interpreted the way you expect, it’s not good for America. As I travel around the globe and meet with world leaders and other CEOs, the litigious culture of the U.S., the class-action culture—quite frankly, the ambulance chasing, the patent trolls—is what’s being talked about.
You’re from Hattiesburg, Miss. How does that affect your view of the continuing outrage in the Gulf?
I know the Gulf. I spent all my summers on the coast. There’s great, great beaches down there, and there’s great seafood and restaurants, a great tourist business. And if you travel from the panhandle of Florida, Alabama, Mississippi, the beaches are clean, the tourism is good, the fishing is good. The Gulf has bounced back really well. And I’d like to think that we played a big role. People who lead you to believe that the Gulf of Mexico is an environmental Armageddon—I don’t think have been there.
We’ve been America’s largest energy investor, and over the last five years we’ve invested $55 billion in energy, far more than any other company. People call BP a foreign company—we’re a global company. We’ve got more employees, more investment, more assets in the U.S. than any other country.
Will that investment trend change as a result of your experience in the Gulf?
No. We remain absolutely committed to the U.S. We have had to become a smaller company to respond to this accident. We’ve divested $40 billion of assets around the world. But we have a massive commitment in the Gulf of Mexico.
Changing gears a little bit, how did you get into the oil industry?
When I was younger, the most important thing for me was I really wanted to see the world. And then I realized oil and gas is everywhere. I was an engineer and then went to school in international business, and all I wanted to do was work with a U.S. international oil company. And that’s what I’ve been fortunate enough to do. Something that’s unique in the U.S. is that oil and gas is a very unpopular industry. It’s probably rooted in the 1900s, the 1911 Standard Oil breakup and Ida Tarbell, and all that is put into the DNA that big oil and energy is bad.
Why do people hate oil companies?
People in oil and gas are sort of perplexed by this. In most places, countries are really proud of their energy industries. They’re thought of as a good thing, as part of the progress in bringing prosperity to the country. But it’s very different here. People don’t like having to pay for something that they have to go to every day, whether it’s filling up your car or—you don’t like to get the electric bill every month or the water bills.
Now, you must have at some point in your career, after some degree of success, said to yourself, “Someday I’d love to run one of these companies.”
Not really, no. I absolutely, passionately, and thoroughly enjoy oil and gas. And I like the geopolitical nature of it, and the international side of it. So all I really wanted to do was run pieces of it around the world, and circumstances brought it together somewhat unexpectedly to do this job.
Your predecessor once removed, Lord Browne, used to boast that BP stood for “beyond petroleum,” an implied promise to move away from fossil fuels. That campaign has disappeared, and you’ve reduced BP’s activities in alternative energy. Why?
Well, that’s right. In 1997, Lord Browne made the speech at Stanford that said, “Not really sure about global climate change, but we can’t be sure, so therefore we need to invest and make sure that technology’s developed as a result of it.” That was very unpopular with the rest of the industry. I used to run the alternative energy side of BP, back about 10 or 12 years ago. We probably invested about $8 billion, not in research, but real projects. The reality is that over time the economics of those have proven very, very difficult. Often, many of these businesses are subsidized by governments. Governments remove the subsidies, so the economics suddenly change. Just this last year, after 40 years as a company with a solar business, we decided you can’t make money in the solar industry, so we moved out of that. We have focused our efforts into biofuels, ethanol fuels—mainly sugar cane in Brazil.
Not in this country?
Well, we went down the path here of what would have been a very high-risk, highly technical, $800 million project in Florida. We didn’t actually get very much encouragement from the U.S., and we’ve got to be really careful how and where we invest our capital now, so we decided not to do that investment last year. In wind, we have 1,000 wind turbines and about 16 big wind projects here in the U.S. We’ll probably call a halt to developing more of those, but the wind will be spinning, and it’ll create the electrons, so that’ll be a part of our business as well.
How quickly will we as a society move toward alternative energy? Or is BP’s experience a harbinger of a real diminishing of investment?
If you laid out the map of energy demand and the kinds of energy that’s produced and where the world’s going, most people are really surprised. Today about 2 percent of the world’s energy is produced by alternative energy. And it’ll be up to only 7 percent by 2030. That’s a big jump in percentage, but in terms of running the engines of the world and transportation, that’s going to be a small part of the answer.
BP had an $8 billion investment in TNK-BP, a joint venture in Russia. BP pulled out some $19 billion in dividends and an additional $28 billion in value when you sold to Rosneft, the government-controlled energy company. But for BP and you personally, this was a risky and at times hair-raising engagement. After your offices were bugged and raided by the police, you fled Russia in 2008 for fear of arrest or God knows what. Yet now you’ve ended up with a 20 percent share of Rosneft. Why are you still in Russia?
And now on the board of Rosneft. Well, a lot of it has been overdramatized. It was primarily differences of opinion with the partners that we had, not the Russian government. It was a great economic success. We got into a dispute. But if you’re an oil and gas company, that’s where the oil and gas is. And our experience has not been bad. It’s been a great financial investment, and we were able to do this transaction with the Russian state oil company at market conditions. And so that’s a sign, actually, that Russia is open for business, and in the right circumstances you can do very well, and it’s a very fair market.
Would you suggest to other businesses that they look at Russia?
I would, and I do. I think you have to have a certain scale and the right partners. And like everywhere in the world, trust is very important. You know, we’ve been operating in countries like Argentina and Egypt for half a century, and you go through periods of ups and downs. Other than mining, oil and gas is the longest-wavelength business in the world. So we are pretty long-term in our thinking. And I have also observed it’s hard to find politicians whose horizons are more than 15 to 18 months. So as an industry, we’ve got to work with our eye on the horizon.
Certainly, Vladimir Putin thinks in the long term, including thinking that he should be in power for the long term. Do you trust him?
I have to say that all of my interactions have been fair and open. And decisions have been made very openly and transparently around what we’ve done in Russia with the president and the government.
You mentioned energy independence. When do you think the U.S. realizes the often-discussed goal of independence from foreign oil?
North America—so that would include Canada, the U.S., and Mexico—should be about 99 percent independent by 2020. The U.S. is sort of on track by itself to be energy independent by 2030, and we’ll probably export some products as well. Many people make a lot of the fact that if it reaches that, the U.S. will not care anymore about the Middle East or will turn its back on other parts of the world. I think U.S. policymakers and the world won’t look at it that way.
When you imagine your grandchildren’s grandchildren’s time, what might be the future profile of energy?
Well, I do think the renewables will—they’ll be like the building of the railroads and the canals. You know, there are multiple cycles of it, and people lost lots and lots of money, and then it finally became more economic. But I do think solar and wind will provide a lot of energy, and natural gas and oil will have roles far out in the future. The reason oil and gasoline are going to be around for such a long time is the molecule of energy—a bundle of energy in a liquid form of hydrocarbon—is such a powerful little transporter of energy. That’s why it’s in the tanks of our cars and the ships and the airplanes. The biggest thing I hope happens in our grandchildren’s time is that people are much more careful with the efficiency of their energy. People today waste a lot of energy.