[Premium] BP's Dudley Clear on Emissions, Less So on Russia

BP CEO Bob Dudley kicked off a London conference of international negotiators April 24 by stressing his company will focus on a “race to lower emissions, rather than a race to renewables”, notwithstanding its investment in the latter.

Dudley (pictured below) said BP’s oil and gas production should grow by about 5%/year out to 2021 “but our emissions will not,” as the supermajor aims to reduce its methane intensity.

He predicted the world’s primary energy by 2040 would be supplied roughly a quarter each each from oil, gas and coal, with the final quarter coming from a mix of hydro, nuclear and renewables. That shift towards a greener economy was making negotiations more and more complex, but there was still the need to get things done fast, he said.

Addressing his audience at negotiators' association AIPN’s International Petroleum Summit, Dudley added: “What you do is pivotal to the industry. Artificial intelligence can’t look someone in the eye in the small hours and do a deal. It’s about relationships and human contact. It’s maybe more important in this fragile world today than before.”

The Russian angle

Delegates though were also keen to learn if BP regretted its exposure to Russia, and how it viewed the risk of sanctions, earning Dudley a big laugh that he perhaps quickly regretted. Dudley fled Russia during the bitter TNK-BP shareholder dispute in the summer of 2008, for an undisclosed destination. BP went on to buy a stake in Rosneft, the Kremlin-controlled oil major.

(Credit: BP)

“There have been some ups and downs,” he admitted before turning to BP’s “strong partnership with Rosneft” on which both sides work consistently: “It’s a good partnership and has a long way to go.” Other lessons learned were to keep out of politics, and “patience, persistence and never make it personal."

Later however, when asked what he’d tell a younger Bob Dudley, the mature CEO quipped: “Stay away from Russia” before quickly adding: “That’s a joke. I enjoyed working there.” His more measured response though revealed that BP’s Russia exposure might not be so deep, had he known the risk to sanctions facing companies in Russia today.

“We always work within the boundary of sanctions. I’m not sure how constructive they are; they seem to be handed out like train tickets,” adding his opinion that commerce between nations improves the chances of political dialogue.

“We [at BP] have a good relationship with Russia, but I’m glad we’re not in Iran. Perhaps the world will put Iran sanctions back on. Sanctions make things difficult.” 

Dudley's answer did not expand on BP’s previously stated goal of jointly marketing Rosneft-produced Russian pipeline gas into Europe, a goal that would need the Kremlin to lift Gazprom’s current monopoly over piped gas sales there.

However when asked later about the prospects for gas developments in the next two decades, Dudley pointed to the way in which floating LNG was lowering production costs. “Natural gas has a role to reduce emissions, but don’t forget the oil business which at the moment has higher margins, if it’s advantaged oil. We will do both.”

Henry Hub plus technology keep prices low

North America is “swimming in gas” and would be a price-setter for the rest of the world. He said that BP had an advantage for being in markets like Egypt that are short of gas, but that gas – and the currently sub-$3/mn Btu pricing effect of US gas “will go everywhere.”

The age of exploration was certainly not over, he told one questioner, noting that improvements to data processing and analytics before the drilling starts were the biggest change for good in that industry segment. Frontiers in Guyana, Brazil and West Africa were opening up, but seismic now was so good that BP was “finding new things in the North Sea.”

Digital advances could also transform petroleum, added Dudley, noting how “the aircraft industry puts sensors in everything” to improve performance – a nod perhaps to BP board member and University of Cambridge engineering professor Ann Dowling - and that the more the oil and gas sector did likewise, the more it would transform the industry.

The BP chief was also asked about moves by academia and funds to divest oil and gas stocks and was asked about recent moves in that regard. “We donate a lot there. I hope they come to their senses,” he replied.

"There's a simplified idea out there that climate change will be solved by everything becoming renewable. That won't work," said Dudley; it had to be a mix. But he pointed to a "big battle between natural gas and coal" underway: "Policymakers are grappling with that."

"Renewables and natural gas are a natural combination," he said, noting how government subsidies for renewable technology had in some places led to these working now without subsidy: "I just wish governments had subsidised carbon capture and storage; they haven't, and it's one of the things needed to keep carbon dioxide out of the atmosphere."