BP Cuts Back Its Alternative Energy Division

"Beyond Petroleum" has been a multimillion dollar ad campaign for British Petroleum. In it, the company spent the past several years touting its alternative energy plans. But now the oil giant is trimming back the division, according to Financial Times reporter Ed Crooks.

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ROBERT SIEGEL, host:

Over the past few years, we've become accustomed to British Petroleum advertising its commitment to alternative energy sources. In television commercials, Americans answer BP's questions, questions like, what will it take to secure our energy future?

(Soundbite of British Petroleum commercial)

Unidentified Woman: There's not going to be one thing that's going to fix it. That's the problem. There has to be a whole array, a whole palette of things that people do.

Unidentified Man: Like wind power, solar, hydrogen. I mean, there's so many other alternatives that are real. More importantly, those things work.

SIEGEL: That ad then says, we've invested $28 billion over the last five years in U.S. energy supplies, including solar, wind, hydrogen and natural gas. It's a start: BP, Beyond Petroleum.

Well, this week, reporter Ed Crooks wrote a story in the Financial Times with the headline, Back to Petroleum. Mr. Crooks reports that BP's Alternative Energy Division's office is being shut, its investment cut, and its chief executive is taking early retirement. And he joins us from London. Hi.

Mr. ED CROOKS (Reporter, Financial Times): Hi.

SIEGEL: How significant a change do those developments amount to?

Mr. CROOKS: Well, they have now quite a significant change, not so much in the amount of money that's being spent, 'cause it was always a fairly small proportion of BP's total investment that went into alternative energy, but in the signal that they send, the signal both to people inside the company and people outside it. Basically, what the chief executive now is saying to people about BP is that it's an oil and gas company. That's the heart of what it does. That's where it makes most of its money, and that's where its future is going to be, certainly, for the foreseeable future.

SIEGEL: And what we're talking about is a new CEO who arrived not too long ago and bringing new priorities.

Mr. CROOKS: That's right, exactly. A new CEO took over a couple of years ago. Lord Browne was the previous CEO, had been there 12 years. He was really kind of unusual in the oil industry. He very much stood out from the crowd in terms of being very early to identify global warming as a risk and very early to think that energy companies needed to do something about it. And so, he placed a lot of stress on this whole idea of beyond petroleum. And when BP talked about going beyond petroleum, that was very much his project.

I think certainly, you could say of Tony Hayward, who succeeded him, there was much less emphasis on that at BP.

SIEGEL: You quote him in your story as having complained at one time. There are too many people at this company. We're trying to save the world.

Mr. CROOKS: Yeah, that's right. There were quite a lot of things wrong about BP when he took over. And certainly, I think, one of them was that its financial performance was poor. And as you say, he was saying, we're not here to be a charity. We're not here to kind of serve high idealistic goals. We're here to provide returns for our shareholders. That's what the job of any business is to do.

And of course, that job has become particularly difficult for the oil companies this year because of the fall of the oil price. Obviously, last year, they were making money hand over fist. This year, they're in much more straitened circumstances, and that means some hard decisions have got to be made. And better, the business that are not making money, like for instance, some of the bits of solar power, some of the bits of wind power, and so on, have had to be curbed.

SIEGEL: So simply on the moral side, you quote somebody in your article in the Financial Times saying that the slogan Beyond Petroleum, BP, wildly successful by some measures, people recognize it very easily, made a lot of people at the company feel that they were undervalued, because they in fact were about petroleum.

Mr. CROOKS: Yeah, that's right. BP is a massive company, 100,000 people, well, rather less than that because we had some job cuts. So, let's say 90,000 people or so work for it worldwide. The vast majority of those are in, as you say, they're in petroleum, they're in oil and gas. And if you hear that the company is moving beyond petroleum, that sends quite a bad signal to you, I think. That says that you're not the really important part of the business. You're not the exciting part. You're not the future of the company. You're kind of redundant. You're a dinosaur. You're passing off into history.

And I think you're right. I think that was bad for morale. And certainly, when you look at some of the problems that occurred in the company, arguably, it was not just because of the slogan, but because of that cultural sense that petroleum was not the heart of what they wanted to do, not what the brightest and best of the company were involved in.

SIEGEL: You wrote in your story, having led the charge, BP is now leading the retreat. When the world does move beyond fossil fuels, neither BP nor any other big oil company is likely to be in the vanguard. If not an oil company, who?

Mr. CROOKS: Well, I think it certainly the electricity company is the one that I would identify as potential winners. And then the others would be companies we might not even know who they are yet. Maybe, you know, biotech, maybe some kind of other odd kind of technology company doing something perhaps you haven't even heard off. I think if we're going to get radical technological change, an energy revolution, it'll be companies we don't know who they are that'll lead it.

SIEGEL: Ed Crooks of the Financial Times in London. Thank you very much for talking with us.

Mr. CROOKS: Thank you.

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Correction July 10, 2009

A previous Web version of this story said BP closed its alternative energy division. This is not the case; the company is reducing the size of the division.

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