BP - NY Times - Green logo, but BP is old oil

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Published in the New York Times, Saturday, August 12, 2006

Green Logo, but BP Is Old Oil

By JOE NOCERA

WALKING through an airport earlier this week, I happened to spot a BP advertisement. You know the kind I’m talking about: the letters BP in lower-case type — making them somehow warmer and fuzzier — above a yellow and green sun, and the words “beyond petroleum.” Like most BP ads, indeed, like virtually all BP marketing, it spoke to the company’s commitment to the environment.

And here’s what I thought when I saw it: “Yeah, right.”

Just a few days before, BP, the world’s second-largest oil company, had revealed that it had discovered a dangerous amount of corrosion on a 16-mile feeder line to the Trans-Alaska Pipeline in Prudhoe Bay. The news put an immediate crimp in the nation’s energy needs — BP said it might have to shut down as much as 400,000 barrels a day, amounting to 8 percent of domestic production, while repairs were undertaken. (As of yesterday, the company was still producing about 155,000 barrels a day.) The price of oil immediately jumped. And of course, had the corrosion continued to go undetected, it could have caused an environmental disaster.

And why was the corrosion detected? Not, alas, because of BP’s routine maintenance. Five months earlier, in another part of the pipeline also maintained by BP, a spill of 200,000 to 300,000 gallons of oil had been found, making it the largest oil spill ever on the North Slope. It was only when the federal government then demanded that the company conduct a thorough inspection of the rest of the pipeline that the corrosion was discovered.

That’s not all. Six months before the discovery of the oil spill, a devastating accident at a BP refinery in Texas City killed 15 workers and injured hundreds more. In June, the government accused some BP traders of trying to manipulate the propane market in 2004, while a new $1 billion BP platform in the Gulf of Mexico tipped dangerously during Hurricane Dennis.

With each successive accident, BP officials quickly apologized. But they were equally insistent that there was nothing systemically wrong with the way the company ran its operations. “We believe in our hearts that these events are unrelated,” a BP spokesman, Scott Dean, said.

Still, it was hard not to wonder: this is the environmentally friendly oil company? Exxon Mobil, which environmentalists love to hate, hasn’t had problems of this magnitude in years, not since the Exxon Valdez spill in 1989. It sure looked as though the hundreds of millions of dollars BP has poured into its public relations efforts were nothing more than, well, public relations.

THE key moment in the modern history of BP — at least as regards its transition to The Oil Company That Cares About the Environment — came almost 10 years ago. In May 1997, Lord Browne, BP’s urbane chief executive, gave a speech at Stanford University in which he said that global warming was a real problem and that oil companies needed to both acknowledge that reality and begin dealing with it. He was the first oil company executive to take such a stand.

In 1998, BP bought Amoco for $57 billion, and Lord Browne decided that was the perfect moment to reposition the company. “When the merger happened, they said, ‘Let’s try to be different and relevant,’ ” recalled Allen Adamson, a corporate image consultant with Landor & Associates, who counts BP among his clients.

Thus was the name changed from British Petroleum to BP. And thus did its ad agency, Ogilvy & Mather, begin using the felicitous tagline “beyond petroleum,” which the agency describes on its British Web site as allowing BP “to reinvent itself as an energy company people can have faith in and inspire a campaign that gives voice to people’s concerns, while providing evidence of BP’s commitment, if not all the answers.”

“They chose a valiant mission that is a potential higher reward, but also a higher risk,” said Mr. Adamson, who added that Lord Browne’s commitment to the environment is “the real deal.” Peter L. Harris, a public relations and communications consultant (who does not have BP as a client), told me that the BP repositioning was widely viewed in corporate America as a triumph. “There probably isn’t a P.R. guy around who didn’t wish he’d come up with that.”

When you talk to BP officials about that commitment, they trot out a host of examples to prove that it’s not just public relations. BP owns a big solar energy company. It has significantly lowered its greenhouse-gas emissions. It has a thriving biofuels program. And it is investing $8 billion over 10 years in alternative energy, like solar and wind power (though it includes natural gas as an alternative energy, which strikes me as a stretch).

Yet at its core, BP remains an oil company, and no matter how much it says it wants to create more environmentally sensitive sources of energy, its basic task is still to stick holes in the ground in search of hydrocarbons. The company recently spent nearly $4 billion building a huge pipeline stretching from the Caspian Sea to the Mediterranean. But it also asked a leading environmental group, the World Wildlife Federation, to act as an environmental consultant on the project; Mr. Dean, the BP spokesman, told me I should talk to someone at the W.W.F. if I wanted confirmation that BP was one of the environmental good guys.

So I did. But James Leaton, a senior policy adviser at the federation, didn’t exactly sound thrilled about how the collaboration had turned out. “In our view,” he said, “there are some sensitive places where you just shouldn’t go. BP went there anyway. They were open to some small changes, but we were fairly disappointed. Whenever you spoke to them, their view was about deadlines and budgets. Ours was about protecting the environment.” In other words, BP acted like the oil company it is.

Environmental groups, in fact, can be fairly scathing in their appraisal of BP. In 2002, Greenpeace awarded Lord Browne an Earth Day “Oscar” for Best Impression of an Environmentalist. “They are just not clean,” Melanie Duchin of Greenpeace told me. “And no amount of rebranding can make them clean.” She made the obvious point that when you make upwards of $20 billion in profit, as BP did in 2005, an $8 billion alternative fuels program — over 10 years! —isn’t exactly a bet-the-company move.

In the wake of the recent accidents, there is now a more pressing — and potentially devastating — question: Does BP’s own internal culture contradict its marketing message? Nicole L. Decker, an analyst at Bear Stearns, said that BP “is one of the best-run companies in the world” and does not act irresponsibly. “The timing has been unfortunate,” she said. “But this happens to every oil company.”

But I found plenty of people, with long experience in the oil patch, who are convinced that BP has long had a culture of corner-cutting that has led to its current problems. “It has to be systemic,” said Matthew R. Simmons, who runs an investment banking and consulting firm specializing in the oil industry. Mr. Simmons pointed out that whistle-blowers had been complaining for years about BP in Alaska.

And, he added, BP’s failure to inspect the pipeline by using a “pig”— a device that crawls through the pipeline taking X-ray-like pictures — was nothing short of negligence. “They found wall thicknesses that were down to four-tenths of an inch,” he said. “That is the thickness of a beer can.”

When I spoke to Mr. Dean of BP, he asserted that the company hadn’t used the pig because it thought that a newer technology, allowing the company to monitor the pipeline externally, was adequate. “We were shocked and dismayed,” he said. “We really felt we had a good inspection and monitoring program. We realize that we need to do better, and we will spare no expense to get it right.”

Mr. Dean, I have to say, came across as genuinely contrite; he must have said “We’re sorry” a half-dozen times in a 45-minute phone call. “This cuts to our core values,” he told me with considerable anguish. I got the strong impression, not just from him but from watching other BP officials on television this week, that the company really is determined to do whatever it can to fix the problems — and prevent them from happening again.

Which is great, so far as it goes. And I give BP credit for acknowledging so forthrightly that it made mistakes. But in the meantime, BP is going to pass through a painful gantlet. It will undoubtedly be raked over the coals by Congress (hearings are set for early September); it will have its worst documents exposed in lawsuits; it will find itself under fierce regulatory scrutiny; and it will be accused, I’m sure, of the worst sort of corporate greed and hypocrisy. It’ll be a long time before anyone believes anything BP has to say about its environmental sensitivity.

I can’t say that my heart bleeds. If BP hadn’t been so holier than thou in its marketing these past years, I doubt that it would be getting hammered right now — at least to this extent. If there is one ironclad rule about marketing, it is that you had better be practicing internally what you are preaching to the world.

Let me put it another way: You can’t just talk the talk, you have to walk the walk.

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