Opinions - 19.05.2011 - 00:00 

BP and Shell: Business as usual?

“Giant, but powerless” was the title of the panel discussion with Shell Chairman Jorma Ollila and Robert Dudley, CEO of BP, on the occasion of the St. Gallen Symposium. An appraisal by Prof. Dr. Thomas Dyllick.
Source: HSG Newsroom


19 May 2011. Under a predecessor of today’s BP chief, the corporate logo of British Petroleum had been changed into “Beyond Petroleum” in view of the renewable energies that were a higher priority at the time, which was intended to express an intention to tap energy sources other than oil to a greater extent. Robert Dudley, however, who has been BP’s CEO ever since the devastating oil leak in the Gulf of Mexico, has admitted that in the meantime, this strategic reorientation has been put on the back burner and that, if anything, the logo stood for “Big, but powerless”.

Massive increase in risk
This created the link with the topic of a discussion with Jorma Ollila, the Chairman of Shell, at this year’s St. Gallen Symposium, which was entitled “Giant, but powerless”. And in view of the strongly increasing costs of oil and gas extraction, and the use of more and more audacious technologies, but also strongly increasing public sensitivity and the obviously badly overtaxed supervisory authorities, the risks of the oil business have indeed massively increased. However, shareholders want to be remunerated for higher risks in the form of higher profits, which seduces those involved into running even higher risks. Thus it may hardly be assumed that the risks of oil extraction will decrease, nor is Deepwater Horizon likely to remain a one-off incident.

Increasing demand in India and China

This will not only confront us with the end of cheap oil; rather, we also live at a time of risks that are strongly increasing owing to the continued satisfaction of the still immense and growing global hunger for energy. Thus BP assumes that the demand for energy will again rise by 30% by 2030, chiefly to meet the demand from China and India. As a consequence, oil will have to be extracted from more and more remote areas and at ever growing expense. As an alternative, the focus is on gas – another non-renewable raw material – which further exacerbates climate problems, albeit somewhat less strongly than oil. In terms of renewable energy, Shell was banking on biofuels from sugar cane. All in all, however, renewable raw materials play a negligible part, said Robert Dudley.

Back in the era of oil

Thus the oil companies have long abandoned the idea of life after oil and have returned to the era of oil and gas. And this is less about the development of future renewable energy sources and more about the protection of existing business. Their statements made clear the extent to which they are being confronted with ever bigger risks. Besides the technological and political risks, it is primarily the extremely volatile oil prices that are making life difficult for them, along with the strong increase in the power of national oil companies, which already control 80% of the oil business today. This is why they are focusing on issues such as risk compensation and the safeguard of trust. For BP, which was on the brink of collapse in 2010, this is largely about the recovery of public acceptance. Robert Dudley repeatedly emphasised how important it was for a big corporation to secure public acceptance (“licence to operate”) as a basis of action, and to earn it again and again. He stressed with unaccustomed modesty that they were only guests wherever they operated and had to behave accordingly; they were not powerful but primarily cautious.

Climate-friendly alternatives fade into the background

Of course, such an observation can only be understood against the background of last year’s traumatic events. How strongly the companies actually act in this spirit and how this is experienced by the people concerned on site would have to be examined. Much more worrying, however, is the realisation that the big oil companies have been absorbed by the massively increased risk of oil and gas extraction to such an extent that the development of renewable energies for the future of our mobility is evidently hardly an issue for them any longer. This means, however, that the requisite innovations must be developed elsewhere.

Thomas Dyllick, Professor of Sustainability Management, IWÖ-HSG