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ve the industry in the direction we think is best for all of us when that makes sense. And we almost always seek to procure that which we consider to be commodity technology from the market. My colleague Tony Meggs, BP s Group Vice President for Technology, will be touching on these and other issues in the panel session on Future Technology . Secondly, the industry must also reach out to academia, to access thought leaders, to provide for continuing technical and management staff education, and to encourage the best students to seek careers in the energy industry. Through our international university research program, BP works with the world s leading scientists and engineers on areas of fundamental science that could transform the way the world produces and uses energy as well as providing solutions with immediate business application. We are committed to investing significant funds over the long term in these relationships, and we maintain them as real partnerships because BP technical people are also intimately involved with the initiatives we support. To give just a few key examples: We support research into fluid flow at Cambridge University which has already paid for itself within a year by identifying and solving a problem in the North Sea. We sponsor a methane conversion program at CalTech and Berkeley in which the two universities are taking different routes, the Berkeley group focusing on heterogeneous catalytic approaches for producing liquid fuels and chemicals, while the Caltech team develop novel, homogeneous catalytic approaches. And as China races to find new solutions to its energy dilemma, we are supporting a 10-year, $10 million program at the Chinese Academy of Sciences and Tsinghua University to develop new clean energy technologies. And lastly, I want to stress the importance of local capacity development. Our industry must always be engaged in the development of local capability and local technology. At BP, we develop staff locally who can truly support the business, and who also have the opportunity to work beyond their home country and develop a broader perspective within the BP family. We build local capacity in the supply chain, so that the construction and services sector can offer a company such as BP the expertise that we need in country. Let me tell you what is possible. In over 40 years of offshore activity in Trinidad and Tobago, no major offshore structures had been built locally. So a couple of years ago we decided to change this for one of our Trinidadian projects: the Cannonball production platform. We incorporated local engineers into the front-end design team in Houston, a Trinidadian engineer was appointed as Project General Manager to move the subsequent engineering, procurement and construction management to Trinidad, and a local fabrication yard was developed in La Brea. The result: a world-class platform with an 850 tonne topsides and a 950 tonne jacket. And it will be able to process 1 bcf/d starting up in a few weeks. This combination of compactness and capacity may well be a prototype for offshore fields around the world. But it s not just about fabricating a metal structure, but building intellectual capacity and capability which will endure. 34% of the engineering manpower and 80% of the fabrication manpower was contributed by citizens of Trinidad & Tobago. And the fabrication yard now has orders for 10 years of future work from multiple sources.So ladies and gentlemen, I hope my remarks have given you some fresh insight into our efforts to create and deploy purposeful technology to meet society s needs. At BP we believe that our strength in technology enables us to make bold choices and focus on the areas that make the biggest difference to our customers and the future of our business. We also believe technology is fundamental to creating low carbon energy solutions. And these are essential if future generations are to enjoy the benefits of energy without an unacceptable environmental cost. There also has to be mutual advantage in the way we apply technology. We want to work in partnership and we believe that fundamentally, we are in this together. An lastly, and most importantly, it is capacity development that creates lasting benefits in the wider global community. It relies on knowledge shared, something all of us here today are committed to. I wish you a very productive conference, a safe time while in Dallas and safe home or onward journey. Thank you very much for your kind attention, and thank you for your active participation in the 2005 SPE Annual Technical Conference and Exhibition. Related links Putting energy in the spotlight Statistical Review of World Energy 2005 European Energy Security Speech by Nick Butler at the International Institute for Strategic Studies, Geneva Technology How we are using technology to make a real and sustained difference Related downloads Supporting slides to Andy Inglis presentation The role of technology in securing sustainable clean energy , ppt , 3818KB back to top 1996-2005 BP p.l.c. | Legal Notice | Privacy Statement BP Global/Press/Climate change Site Index | Contact us | Reports and publications | BP worldwide | Home Search: About BP Environment and society Products and services Investors Press Careers BP Global Press Speeches Press Releases Images/Graphics Features and news Speeches Climate change Speaker: Lord Browne Speech date: 06 October 2005 Venue: DTI / DEFRA Conference, Cafe Royal, London, UK Title: Group Chief Executive, BP plc Ladies and Gentlemen Good morning. It is a pleasure and privilege to be here and to contribute to this discussion. I think we re at a very important moment in the debate on Climate Change. In the run-up to the G8 summit in July, the Scientific Academies of each of the eight countries, including the Royal Society, came together to publish a statement on climate change. It is a very precise, rational statement which to me marks a new stage in the debate. The statement says that climate change is a risk we cannot ignore and that precautionary action is necessary, indeed essential. When academicians from every major country say that, I don t believe any serious person can ignore them. They are not claiming the science is complete, or denying that there are things we don t know. But they are saying, with all their individual and collective authority, that we have to act. We can t afford to wait for the science to be completed, and nor can we wait for universal political agreement. Neither are very common occurrences. Science is never complete and universal political agreement is almost an oxymoron. We have to act now, and the question in this session is, what can business do? The simple answer is that we have to do the only thing we have the capability to do. We have to provide business answers. We have to take the problem, and use our skills and technology, our commercial experience and our knowledge of markets to help to provide the answer. What does that mean in practice? Well, every business is different and so there is no common solution. I ll talk about BP, but I think the approach we re taking is replicable in many other businesses, large and small. We started by reducing the emissions from our own operations.We set a target of reducing emissions by 10 per cent below the 1990 base-line. We established an internal trading system so that we could apply resources in the most effective way rather than just asking every business unit to achieve the same percentage reduction. We met the target ahead of schedule and we found that rather than costing us money, the process added value over $ 600 million of value because most of the reductions were achieved by improving efficiency, changing business practices and eliminating routine flaring. Now we feel it is time to take another step. Our actions are built on the presumption that the day will come when carbon is priced. The pricing may not be universal, but I believe it will be quite widespread across the world within the next decade. The European emissions trading system is an excellent initial step. So too are the initiatives being taken by different states in the USA. I believe we ll see many more such steps, particularly if popular opinion is influenced by the extreme weather conditions we ve seen this year including twelve named storms and four hurricanes in the United States and by the views of those observers who make a link between the warmer sea temperatures which cause these storms and climate change. As carbon is priced, we believe there will be a market for technologies which reduce emissions and which displace energy production which would otherwise generate emissions. We ve announced one project which I believe has huge and very exciting international potential. The process of carbon capture and sequestration allows us to separate out carbon from the other elements in different forms of hydrocarbon; to capture and store that carbon and to use the hydrogen which remains to produce carbon-free electricity. We are now in the process of developing our first project using gas from the North Sea, and sending the hydrogen to the on-shore power station at Peterhead. That project is at an early stage and will need an appropriate regulatory and fiscal framework. But we are very optimistic about the technology, and as we learn from the North Sea project we hope to develop a series of others in Europe, in the US and in China. And, of course, this isn t just a BP initiative.Many companies are working in this area, and we are delighted to be part of the new Carbon Capture and Storage Association which is being established today. Sequestration and the production of decarbonised fuels is one element in the approach. It will help to change the fuel mix in the sector which is responsible for a greater proportion of emissions than any other that is the power sector. We re already working on other technologies including solar and wind power on our own sites. And we now believe that the activity as a whole the supply of the means to generate clean power can be a commercially viable activity a distinct business investment. It will be a global business. That step will represent the latest element in our commitment to move beyond petroleum. That is a phrase much misunderstood. For us, beyond petroleum has always meant two things. First, the development of new ways in which to produce and supply oil and gas through clean fuels, through greater efficiency and through substitution particularly of coal for gas in the power sector. We ve been doing that over the last decade and it will continue. The world will need oil and gas for many decades to come. The second element of beyond petroleum is the development of new fuels which can, over a long period, begin to provide new choices. That has been going through a research and development phase and it will continue. But now is the right moment to invest and to move into a business phase. Business exists to meet the needs of its customers. That is the fundamental purpose of business enterprises. In our case that means supplying the energy which people want for heat, light and mobility. But the needs are changing and now people want energy in forms which don t damage the natural environment. That is a legitimate customer choice and businesses which want to thrive over the long term will have to respond. So this is an important moment in the debate. The risks are clear. The academies have set them out with a clarity which is beyond contradiction. Now the time has come for business to respond and to take a lead. I hope, in doing so, that we can demonstrate just how much is possible. We hope that success will clear the way for some agreement on a wider political framework which would be invaluable in ensuring that progress is made in the most efficient and cost effective way. But that s an outcome and not a precondition. For the moment the role of business in responding to climate change is to do business. Thank you very much. Related links Climate change Find out more about BP's role in finding and implementing solutions to one of the greatest challenges of this century Decarbonised Fuels Find out how BP are setting a new standard for cleaner energy Post G8 - climate change John Browne comments on climate change following the G8 meeting back to top 1996-2005 BP p.l.c. | Legal Notice | Privacy Statement BP Global/Press/World Petroleum Congress - Dewhurst Lecture Site Index | Contact us | Reports and publications | BP worldwide | Home Search: About BP Environment and society Products and services Investors Press Careers BP Global Press Speeches Press Releases Images/Graphics Features and news Speeches World Petroleum Congress - Dewhurst Lecture Speaker: Lord Browne Speech date: 29 September 2005 Venue: World Petroleum Congress, Johannesburg Title: Group Chief Executive Ladies and Gentlemen Good afternoon. I want to begin by thanking you, both personally and on behalf of BP, for the honour of this award and the opportunity to deliver this lecture. This is the seventy second anniversary of the first World Petroleum Congress, held in London in July 1933 thanks to the energy and commitment of Thomas Dewhurst who believed that our industry, working collectively, had a unique role to play in providing energy to the world and in helping to renew the sense of prosperity and progress which had been lost. He believed that science and technology applied by business could change the world. It s an enormous pleasure to be here and to have the chance to speak at this tremendous meeting.It s also a privilege to have the opportunity to step back from all the day to day activity of the business and to think about the industry its past, present and future. It s more than 35 years now since I joined the industry in Scotland working in the North Sea and then in Alaska working on Prudhoe Bay and learning the science of petroleum engineering. I m struck by what has changed in those 35 years. Just taking the period since 1970. - an increase in oil demand of 35 million barrels per day an increase of almost 80 per cent. - a shift in the pattern of the market with a steady growth in Asian demand. In 1970 only one barrel in 7 was consumed in the East; now it is just over one in 3. - we ve seen a dramatic growth in trade. In 1970 just 25 million barrels a day was traded internationally. Now the figure is 48 million barrels a day 60 per cent of the world s daily needs. Then the flow of trade was predominantly from developing countries to the developed.Now by far the most important elements in the growing trade in oil are the emerging markets of Asia and Latin America. - we ve seen a shift in the fuel mix, establishing natural gas as one of the primary sources of fuel for power generation. - there s been a dramatic change in politics opening up Russia and China and Vietnam, and many other places which until only 15 years ago were closed to international investors. And then of course there have been numerous advances in technology - advances in which so many people in this room have been personally involved. - in drilling, including the development of horizontal drilling. - In the application of IT throughout the industry including visualisation, so we can walk through an oil field and understand with much greater precision then ever before its structure and the ways in which the reservoir works. - In seismic imaging, allowing us to look at structures before any drilling takes place and enabling us to do things which once seemed impossible, such as looking through salt. - in deep-water technology which has taken the horizon of the possible from 1,500 feet in 1970 to 10,000 ft or more in the latest wells in the deep water of the Gulf of Mexico. - In refining technology, much improving the quality of the products produced. - In the technology of the internal combustion engine, which when you combine new fuels and new lubricants and new engine design can transform the efficiency of vehicles. - In the technology of turbines, particularly combined cycle turbines which have made natural gas the most attractive fuel for power generation. - In the technology of LNG which has reduced costs and made natural gas an internationally traded fuel. And then there have been the changes in the structure of the industry.First the consolidation of OPEC as the dominant force in the industry, then the emergence of new non OPEC suppliers and strong state companies, and then the re-structuring for the first time in more than 50 years of the international private sector and the emergence of the super majors. Despite all those changes, despite periods of conflict and revolution, despite extended periods of high and low prices sometimes characterised by great volatility, supply has continued to flow and to meet demand. Throughout the whole period there have never been any serious supply shortages. And that has also been the reality of the last few weeks. Hurricane Katrina took over 800,000 barrels per day out of production and shutdown four refineries on the Gulf Coast. But supplies to all consumers were maintained. The industry responded to the need very quickly and very effectively. That has been the pattern of the last thirty years the supply system has proved itself again and again to be capable of a rapid response to unpredictable events and circumstances. That s a tribute to an open market system and it s a tribute to this industry. The story of the last thirty years is fascinating, particularly for those of us who have lived through it. But the history isn t finished and there s now a new challenge for the industry which is to restore stability and confidence to the market, and to convince people that they can indeed rely on oil and gas as their principal sources of primary energy. The perception of insecurity and potential shortage is reflected in the current price, of course, but it is also reflected in the public commentary on the industry. There is no shortage of books predicting the end of oil. I counted ten in just one bookshop in London. I believe those predictions are misplaced but I believe we have to prove the case once again. To do that, we have to look at what has happened, to examine the causes and to define the remedies. Why has the current sense of insecurity grown? Why are people and politicians nervous about energy in general and oil in particular? There are a number of factors: First, demand is rising. The world s population is growing... and more and more people have the prosperity to be able to afford energy for heat, light and mobility. On a worldwide basis there are probably an additional 200 million new customers for commercial energy every year. Chinese demand grew by 2.3 million barrels per day between the end of 1999 and the beginning of this year. On the figures produced by the International Energy Agency, demand for oil by 2015 will be between 15 and 20 per cent higher than it is today over 90 million barrels a day. On the same estimates the demand for gas could be more than 40 per cent higher. Secondly the requirement for trade is growing. Supply and demand are not co-located. World trade in oil has grown by 18 per cent in just the last five years alone. Trade accounts for well over half the oil used everyday. By 2015 that could increase to two thirds. That means more than 65 million barrels a day. At the same time it is becoming obvious that the available resources are concentrated in a limited number of places in Africa, in the Middle East, and in Russia. Some of those places remain, for the moment, beyond the reach of international investment. In many cases the resources are held directly by Governments and are not open to development by the international industry. I find it very striking that our industry is one of the very few businesses in the world where the private sector share of activity is actually declining. Then there is a need for investment to ensure that the resources which are available are developed and brought to market in good time to meet rising demand. Investment in developing new fields and in establishing new infrastructure such as pipelines and LNG terminals. The scale of that necessary investment is rising. According to the International Energy Agency the annual requirement for investment in all forms of energy is now around $560bn a year. Of that more than a third is in oil-field development and the infrastructure necessary to bring it to market - perhaps $200bn a year. That represents a 20 per cent increase over the level of investment which was being made through the 1990s. Then there is the longer term challenge of the environment. I think the period when people could live in the hope that issues such as climate change would be disproved and go away has passed. If you read the statement published before the July summit by the scientific academies of all G8 countries you will find a cool and rational assessment of the evidence by some of the most authoritative scientists in the world. The science is unfinished of course. There are things we don t know there always will be. But the academics come to the unanimous conclusion that precautionary action is necessary. The emissions of carbon into the atmosphere are now probably 16 per cent higher than they were in 1997 when the Kyoto protocol was signed. And they are set to be 33 per cent higher by 2010. Climate change is a long term issue, of course, but year by year the point at which we could face harsh choices is coming nearer. So, growing demand, growing trade, a requirement for increased investment and the need to handle the long term environmental challenge of climate change and global warming. Those are the reasons why people feel insecure about energy. And on top of those long term challenges have come the shorter term issues which have put energy right into the headlines. The fact that a single hurricane in the United States, probably produced by the warming of the waters of the Gulf of Mexico, can affect the whole world market as US production and refining is shut-in and as product supplies flow from Europe to meet American needs. The fact that prices have risen by more than 80 per cent over just the last eighteen months to a level as high as anything we have seen since the beginning of the 1980s. And the fact that the conflict in Iraq is making it impossible to begin the investment necessary to increase production in one of the most important areas of the world. Those are the reasons why people are concerned. Why people are talking about the end of oil. The challenge for the industry, for all of us, is to prove them wrong. It is our industry and we can t expect anyone else to do the job for us. And I believe we can prove them wrong. First we can explain very clearly the reality which is well known to everyone in this room. The world isn t running out of oil. There is no physical shortage of oil or gas. There are decades of booked reserves of both oil and natural gas and even more yet to be found. And there are huge volumes of heavy oil in Canada and Venezuela which are identified and which have yet to be developed. Secondly we can bring that oil to market at a reasonable cost a cost well below the current market price. And the industry is investing to do just that. The 1990s were a period of relatively low investment for the simple reason that prices were low and cash flow was limited. But that began to change with the turn of the century. The underpinning of prices from 2000 onwards has increased the funds available and the industry has responded by increasing investment. Over the last five years annual upstream investment by the five largest companies in the industry has risen by over 50 per cent and is now running at around $50bn a year.The private sector is making its contribution to the development of the resources which the world needs. BP alone has invested $ 50 bn upstream since 2000. In places such as Russia, Angola, Trinidad, in the deep water of the Gulf of Mexico, in Algeria and in the Caspian. The industry has also invested in the continuous improvement of the refining business upgrading capacity and ensuring that there is sufficient refining capability to meet the changing and growing needs of the market. That s a continuous process and the challenge has not always been made easy by the complexity of regulation and permitting procedures, and by the added and unnecessary complexity caused by minor differences in product specifications between one area and another. It has been interesting to see that in the response to Katrina in particular the relaxation of minor state-by-state differences in product specification was one of the keys to the resolution of the immediate problems in some particular markets. The market was opened and order was restored. As well as investing in exploration, production and processing facilities worldwide, the industry is shifting its geographical base and in the process is beginning to learn how to operate successfully in complex areas, in countries in transition, and in emerging markets. We re beginning to understand that if you want to manage the risks of a very long term investment it is important to be engaged with the countries in which you are operating. Not just extracting resources and paying taxes, but also playing a part in the successful development of those countries. Being transparent about what you pay; staying out of politics and making no political contributions. Avoiding bribery and facilitation payments and working with local communities to develop enterprise and education to ensure that countries are ready and able to make full use of the wealth which resource development can bring. We re beginning to understand how to help the countries in which we work avoid the resource curse the negative impact of suddenly becoming what Adam Smith would have regarded as a rentier, with a huge inflow of unearned income which can swamp all the incentives which shape an economy. We re only beginning to learn and there s much more to do, but I believe that this will become an ever more important issue as the geography of energy development shifts from the OECD world to emerging economies in places such as Africa and Central Asia. The industry is also learning how to work in partnership with state enterprises and Governments. The notion that everything was going to be privatised and that oil and gas exporting countries are going to give up their patrimony has been shown to be mistaken. Governments and state-owned enterprises are enduring elements of our industry. Our challenge is to work with them, and to realise the full benefits of a partnership built on mutual advantage. Every country is different in its history and its capabilities. I d just quote two where we ve found that partnership is not only working but has enabled business to be done which would otherwise have been impossible. By the end of this year we hope to inaugurate the pipeline from Baku through Tbilisi to Ceyhan on the Turkish coast.That line will bring at least 1 million barrels a day of oil to the world market and it will be followed by the development of a natural gas line from Baku to the Turkish border. That whole development is a prime example of effective cooperation between private international companies and public authorities and state enterprises. The combined effort has produced a development which will not only help to relieve pressure on the world market but will also enable each of the countries involved to benefit directly from the flow of resources. If we believe in global markets we have to make sure that the benefits are spread widely and that large numbers of people feel that they are gaining personally from globalisation. Another very different example of partnership is the development of our investment in Russia through TNK BP. That investment is raising production and generating a healthy cash flow. Production has increased by 20 per cent since the partnership began two years ago. We ve begun to apply the best international technology and as a result we ve increased reserves including the reserves of some of the largest mature structures. TNK BP is a partnership between BP and Russian investors backed by the Russian Government. Russia is of course a country in transition. A great power which has moved an enormous distance over the last twenty years since Mr Gorbachev embraced glasnost and perestroika. The transition isn t over but as investors we can see how much progress has been made. And that progress is of crucial importance to the whole energy balance because after the Middle East, Russia is the only country with the capacity to be a major energy supplier to Europe, and to China, and the countries of Asia. And finally I believe the industry is beginning to provide answers to the long term environmental challenge of climate change. Many different companies are involved in that process. People are not just reducing the emissions from their own operations. They are also beginning to develop new technology which can take the challenge of climate change and transform its resolution into business opportunities. I ll quote just one example. We have worked for most of the last decade on the basis that one day carbon will be priced and that the application of technology which can reduce carbon will have a commercial value. The emissions trading system established by the European Union is one of the first steps towards establishing such a system. As well reducing our own emissions through stopping leaks and improving the efficiency of the ways in which we consume energy, we ve been examining technology which can transform the way in which resources are used. We have a new project which is just getting underway which will separate out the chemical elements of hydrocarbons, re-inject the carbon into oil or gas reservoirs, with a consequential increase in reservoir pressure and recovery rates, and simultaneously supply the hydrogen to a power station which can produce carbon-free electricity. It is very exciting technology which we believe can be applied in many different places. And it s just one example of the way in which technical skills can be applied to meet the challenge of the environment. This industry is all too often seen as part of the problem. In fact, I believe we have a unique ability to offer the solutions. Ladies and Gentlemen, energy security is often discussed in terms of what Governments can do. The role of Governments is certainly important. They have to ensure that there is an open trading system, that the necessary investments can be made in different areas, and that the incentives are in place for everyone to do what they can to tackle challenges such as the environment. In the refining sector they can encourage new investment by reducing complexity. But Governments alone won t deliver energy security. It s down to us. To this industry. And there are three fundamental reasons why our industry can deliver energy security. First, as the papers delivered at this conference will demonstrate again and again we have the technology. This is one of the fastest moving and creative technology-based industries in the world. The boundary of knowledge in every aspect of the oil and gas industry is moving day by day. At the beginning I listed some of the things which technology has delivered over the last 30 years. But there s more to come. I m sure everyone in this hall can think of an advance in technology and engineering which they believe will become part of the normal operations of this industry in the years ahead. - production from ever deeper water. What do you think the limit of the possible will be in 2020 - 20,000 ft, 25,000 or more? - the development of cleaner fuels. When do you think our industry and the auto industry will be able to produce genuinely zero-emission vehicles? And when will we see a similar transformation in the power sector which is such a significant source of emissions. In 30 years time, in 20 or even less? - the progressive extension of recovery rates. What do you think will be the average recovery rate from an oil field by 2020 with the application of yet more advances in seismic imaging, in computing and in areas such as multilateral drilling. 65 per cent ? 70 ? or even more. - And the development of technologies which can convert fuels from one form into another.- Do you believe that conventional oil will be the only source of commercial supplies of gasoline by 2020? Or is it more than likely that the conversion of coal and gas at a material scale will have become both technically and economically viable? Those are just some of the more obvious, perhaps predictable advances. I am sure there will be even more which lie beyond our current imagination. The potential for progress rests on the quality of the engineers and scientists we have in the industry. From everything that I see happening there is enormous scope for optimism. The second factor which supports that belief in progress is the scope and reach of this industry. Because of the developments over the last decade the industry now has the capacity to spread and share knowledge and ideas on a global basis very quickly. This is one of the most genuinely international sectors of the global economy. That s why it has been able to sustain supplies through all the change and volatility of the recent past. The restructuring of the industry which began in the mid 90s is part of that. Global companies have a special role in sharing knowledge and making markets work effectively. But just as important is the network of links between the large and the small, between the international oil companies and the service sector, and between all of us and the academic community. And thirdly, we have the capacity and the experience to take the managed risks that are necessary. To invest on the time scale required in multiple major projects across the world, within a management structure which imposes discipline and high standards. The largest companies in the industry have grown remarkably over the last fifteen years. That growth has made possible the pattern and scale of investment we see today with activity today balanced by developments for tomorrow, and by planning for the day after tomorrow. That level of activity has helped to sustain supply.And it has brought the development of a strong service sector and the continuous renewal of a set of specialist companies focusing their technical and commercial skills on specific issues and areas. The history of the last thirty years is a story of huge change and great success. I think the next thirty will be just as challenging, and will see just as much change. There are many issues to be addressed and many potential hazards, but I do believe that given the quality of this industry, and the companies and people within it, those next thirty years will be just as successful. This industry is needed as never before. And I believe we are ready to rise to the challenge. Thank you very much. Related links Technology How we are using technology to make a real and sustained difference Putting energy in the spotlight BP's Statistical Review of World Energy 2005 back to top 1996-2005 BP p.l.c. | Legal Notice | Privacy Statement BP Global/Press/Health, Safety, Security and the Environment - a driver of business value in the 21st century Site Index | Contact us | Reports and publications | BP worldwide | Home Search: About BP Environment and society Products and services Investors Press Careers BP Global Press Speeches Press Releases Images/Graphics Features and news Speeches Health, Safety, Security and the Environment - a driver of business value in the 21st century Speaker: Greg Coleman Speech date: 19 September 2005 Venue: SPE Conference on HSE, Kuala Lumpur Title: Group Vice President Health Safety & Environment Introduction Good morning everyone. It s good to be here among so many HSE professionals or HSSE as we call it in BP, with the extra S for security. I appreciate the opportunity to speak to you this morning. This has been a very tough year for many of us, and especially for BP. In particular, we experienced the worst disaster in our recent history at Texas City Refinery in March when 15 people lost their lives and many more were injured in an explosion and fire. It has also been a year when we and many others - have had to contend with the hurricanes in the Gulf of Mexico. And the year of course started with the efforts to provide relief after the tsunami that cost so many lives. BP s emergency response centre for the tsunami was here in Kuala Lumpur. And here we saw a remarkable example of cross-industry co-operation. This occurred with the mobilization of a Hercules aircraft that is kept available for oil spill response by East Asia Response Limited, or EARL, a business run by oil and gas companies operating in Asia. The Hercules had a vital role to play as it could fly closer to the disaster zone in Bander Aceh than the international aircraft ferrying the aid into Bataan. Releasing the aircraft from its oil spill obligations meant getting agreement from all 26 of EARL s member companies. However, we got that agreement quickly and the aircraft flew relief missions for four weeks, funded by ourselves and other EARL members. So at the start of this conference I think it is worth acknowledging the tremendous power of partnership in this industry. That power is symbolized by the people in this room and indeed by the work of the SPE. The SPE is an organisation that BP is proud to belong to. No less than 1600 BP employees are members of the SPE and 400 of them have held positions with the Society. Our people have written nearly 3000 SPE papers and every year we download around 15,000 papers from the e-library. This doesn t happen because our people like reading papers. It happens because they are working on major projects and the SPE s papers are very practical and relevant. In a year like this one, there is often little time to reflect, but in collecting my thoughts for this talk I felt that the overwhelming lesson of the year for HSSE was simply the enormous significance of what we do, not only for business, but for the wider world. We deal with matters of life and death. Prevention, of course, is our key word, but we also handle emergencies, crises and disasters. We take the lead in learning the lessons when things go wrong. And the issues we deal with have a major impact on our organisations reputation and value. We don t undertake our work primarily for commercial motives. But nonetheless our work has significant commercial benefits. This is what I mean by HSSE being a driver of value . I am a strong believer that if we get HSSE right for the sake of our people and the communities we serve then we will also get things right for our shareholders. And as HSSE is critical for value then it needs to be recognised and resourced as such. And if I have one message today, it is that HSSE is not an overhead. It s an investment. And don t just take my word for it. Ask Goldman Sachs. Last month they issued a report called Sustainable Investing in the Energy Sector which argued that there is a clear link between leadership on environmental, social and governance issues and the ability of companies to deliver new legacy assets. A previous report was simply called Environmental and Social Issues Count and wasn t then able to make as strong case for the connection to value. One important way in which environmental and social issues count is in the battle for talent. In BP we have an aspiration to have no accidents, no harm to people, and no damage to the environment . And this appears to strike a chord with the values of people who come to work for us. For example, every year our internal Helios awards programme attracts hundreds of entries on HSSE issues. So in my view there is a very clear connection between having values meaning principles - and creating value meaning returns. Unfortunately, many people do not seem to recognise that business can have values. In a recent survey by Globescan, 65% of people said they trusted NGOs. 59% trusted the UN. 53% trusted governments. But just 42% trusted large global companies. I think one way to improve that rating is to tell our story more confidently. Energy has been essential to the world s development over the past century, with its higher life expectancy and living standards. The fundamental purpose of our industry is to provide high-quality, reliable energy to meet the needs of world s 6.5 billion people, and doing more to benefit the 2 billion people who survive on less than $2 a day and who desperately need what we produce. Sometimes I think we need to remember we are doing something good for the world and we should be proud of it. So let me look at a few aspects of health, safety, security and environmental management and how they have an impact on value. 2.1 Safety TXC - I ll start with safety. And before making more general comments let me tell you what I can about our ongoing response to the Texas City tragedy. Essentially, we have responded in the only way we can by accepting responsibility, doing what we can for the bereaved and injured, and conducting a detailed investigation in order to understand what went wrong and to prevent such a thing ever happening again. We will shortly be publishing the results of the full root cause investigation which will identify systemic issues that lay behind that situation. The incident has caused us to examine our working practices and to review a wide range of procedures from ensuring correct practices are followed in control rooms to when people should sound alarms. We have been implementing a series of recommendations to address the immediate causes identified in the interim report of the investigation. For example, on a very practical level, a program is underway to move all trailers and temporary accommodation out of areas of refineries containing hydrocarbons where major accident risks exist. And we have initiated a program to replace all of the blow-down stacks of the type involved in the discharge that led to the explosion at Texas City. These are substantial programs around half a billion dollars of investment in total and they are intended not only to prevent another such incident, but to move us to a new level of safety practice. Texas City was a shocking reminder of our own fallibility. But we also have to maintain our perspective in order to retain the confidence of our people and the communities where we work. This one terrible event does not invalidate the achievements of thousands of people day by day around the world. Indeed, in BP, the fatality trend had been falling until this year. And our injury rate, measured in days away from work case frequency, has gone down from around 1.5 cases per 200,000 working hours in 1988 to 0.08 in 2004. In Exploration and Production, safety performance has improved by 80% over the last 5 years. If we were working to the performance standards of 1999, then 6500 more recordable injuries would have occurred since that date. This is a tribute to the work that has been done by thousands of people to embed our safety values, standards, rules, and systems. And of course this trend is not confined to BP. The latest figures from the International Association of Oil & Gas Producers show that the fatal accident rate in the global E&P industry has virtually halved since 1995 and the lost time injury rate has fallen from over three per million hours worked in 1995 to around one last year. A particular concern for BP in the last 2 years has been driving. The problem was brought home in 2003 when 20 people died while working as employees or contractors for BP and 14 of those deaths involved vehicles. And out of 31 fatalities among members of the public in incidents related to our activities, 28 were transport-related. 2.3 Health In health, like security, our work begins with our own people, but it extends outwards into communities, where it will inevitably affect perceptions of our business. BP actively participates in the Global Business Coalition on HIV/AIDS as one of 250 corporations world wide. Our initial programmes to address HIV/AIDS were focused on our workforce promoting tolerance, respect, education, support and treatment. Our experience has naturally led us to extend our activities to families and then to communities. To take the example of Papua again, there we are working with NGOs in a five year care and prevention programme. Like many companies, we are also taking measures to prepare for an influenza pandemic. The World Health Organisation, the US Center for Disease Control and world experts advise that it is a case of when not if . As a result we developed a global driving standard - with assistance from external experts setting out what is expected of BP drivers and their vehicles. For example, this stipulates that no driver will ever use a mobile phone while driving, even hands-free and that all BP drivers and their passengers will wear seat-belts, even if they are not required by local laws. The standard has been publicized and implemented right across BP s operations in 100 countries, with videos, workshops and training packages. And in 2004, workforce fatalities linked to driving fell from 14 to 4. Another area in which we are making progress is preventing tanker rollovers, which typically costs over $ 1 million per incident. After one particularly bad period we took action and found that the immediate causes included driving too fast and fatigue. The root causes included inadequate training and management. We responded by calling a time-out to raise awareness and arrange training. And in the subsequent two years we nearly halved the number of rollovers. We re also seeing signs that we are becoming known for our road safety standards. In China for example, one of our employees got into a taxi and put on her seatbelt. The taxi driver said I expect you work for BP. What better brand recognition could you ask for? 2.2 Security Moving onto security, this is also about keeping people safe, but it also involves protecting sites and pipelines - and that that can enhance or damage value, depending on how sensitively we carry it out. Over the past decade we have learned a lot in this area. In particular we worked with governments, companies and NGOs to draw up the Voluntary Principles on Security and Human Rights for the extractive industries. One place where we have applied these principles is Papua, Indonesia, where we have created a community based security programme which has won the support of local officials, the police, the military, and the Ministry of Defence. And incidentally, our Indonesia Business Unit leader, Anne Drinkwater, will be speaking at one of the sessions this afternoon. To address this threat, it is critical to undertake preparedness planning in assessing and minimizing risks. For example, building on the experience from the SARS outbreak in 2003, we are requesting that our businesses review their Business Continuity Plans so we can develop a suitable approach across the region. 2.4 Environment Finally, the E of HSSE. Can what is good for the environment also be good for value? In our experience the answer is a definite yes . 2.4.1 Green fuel One of the clearest examples is the success of a premium fuel called BP Ultimate which can increase fuel efficiency as well as generating lower emissions of carbon monoxide and nitrogen oxides than standard fuels. In the first half of this year, nearly 1.5 billion litres of Ultimate were sold in Europe alone, a 70% volume increase on the same period last year. 2.4.2 Climate A more complex example is the way we address the major environmental issue of climate change. As you know, BP acknowledges the weight of the scientific evidence and accepts the need for precautionary action on this issue. In the initial stages of our action, we cut greenhouse gas emissions by about 10% through energy efficiency projects and reductions in flaring and venting. And by doing so we generated around $650m of net present value. Now the stakes are higher. There is continuous debate over the way ahead. Emission trading schemes are underway. Governments are considering new ways to stimulate lower carbon solutions. The Goldman Sachs report I mentioned earlier identified the companies with potential for creating significant value as those with the most strategic options available for a low-carbon world. In BP we have sought to develop a number of options as well as an overarching view of the challenge. We believe the key goal is to bring greenhouse gas emissions back to today s level of around 25 billion tonnes of CO2 equivalent a year by 2050, despite a projected doubling of energy consumption. That leads us into developing solutions that can help to deliver such a reduction. For example, we have increased our sales of natural gas by nearly 50% in three years. We are building scale in our solar business. We are conducting a large-scale trial of carbon dioxide capture and storage at a major upstream gas plant in Algeria and we have set out plans for the world s first gas-fired hydrogen power station incorporating carbon dioxide capture and storage using depleted reservoirs in the North Sea. 2.4.3 Helping individual countries address climate change Here in Malaysia we have become the first partner in a project called mobilizing Malaysia on climate change with the Centre for Environment, Technology and Development. This has involved us in raising awareness and in showing that efficiency can reduce both emissions and costs. Our petrochemical plant at Kuantan has reduced its total energy cost by 10%, saving 16.8 million ringett or around $4.5m - per annum. Incidentally let me add that I am delighted to be in Malaysia today. This is a country where BP has had a long successful history. We have capital employed of around $500m, and our business includes four major petrochemical plants and a lubricants business with a market share of 32%. Here we are a local company as well as a global one with over 800 staff who are 97% Malaysian. I m also very pleased that our HSSE performance here has been recognised. BP Petronas Acetyls last year gained the Overall Winner s Platinum Award in the Chemical Industries Council s Responsible Care Awards. And both of our chemicals businesses have held the Prime Minister's Hibiscus Award the premier environmental award in Malaysia. In China too, we are making an increasing contribution to the search for environmental sustainability. In Guangdong province, for example, we are the only foreign partner in building a liquefied natural gas terminal and trunk-line project, offering a lower carbon alternative to coal. We are also supporting a project at Tsinghua University that is investigating sustainable urban mobility for China. 2.4.2 Sensitive Areas Let me mention one final important environmental issue that of working in sensitive and protected areas. This is becoming an increasingly important issue as the search for energy resources takes our industry into remote areas that are rich in biodiversity. Access to such areas is of course a decision for governments. Once the decision it is critical that we work in such areas in a way that it acceptable to broader society. It is important that we have a transparent and rigorous approach and this is why over the past year we have created a set of global Environmental Stewardship Principles which are now being tested prior to full roll-out next year. These affect the way we carry out Environmental Impact Assessments and the way we build those assessments into environmental management. The most important new feature is a very early screening process that will normally take place well before any physical activity. These principles will be applicable to Marine Protected Areas MPAs - which are currently being given much attention - and are relevant to BP as our strategy is weighted to offshore areas. We are helping to develop a multi-company research program into MPAs through IPIECA and OGP and we are involved in monitoring marine mammals at sites in Indonesia, Angola, the Gulf of Mexico, Sakhalin and Alaska. Conclusion So while HSSE is first and foremost about keeping people and places safe, secure and healthy, it is also a major driver of value. If we are seen simply to be complying with the laws, no more, then we will simply be recognised as compliant, no more. If we go beyond compliance to set out own global benchmarks, then I think we will be respected. But if we step out to take a lead in other words if we set new benchmarks in HSSE performance, then - because these issues are vital to society - we will be actively rewarded. We will attract and satisfy customers, investors, partners, governments, employees and shareholders. So, to conclude, I have given you some tangible examples to show that good HSSE creates value. Value is of course monetary but it is also about life and people and we value those much more than money. I want to finish by challenging everyone here to consider both the impact on people and financial value in every recommendation you make to your companies. And while we discuss HSSE or HSE - this familiar business acronym, let s keep remembering how much these issues mean to the world beyond our businesses. What could the world possibly value more than its health, its safety, its security and its environment? They re critical issues. And they are our issues. That s why what we do matters. And that s why we re here. So thank you and I hope you have a really productive conference. back to top 1996-2005 BP p.l.c. | Legal Notice | Privacy Statement BP Global/Press/Energy and International Relations: The Changing Agenda Site Index | Contact us | Reports and publications | BP worldwide | Home Search: About BP Environment and society Products and services Investors Press Careers BP Global Press Speeches Press Releases Images/Graphics Features and news Speeches Energy and International Relations: The Changing Agenda Speaker: Nick Butler Speech date: 19 September 2005 Venue: John Hopkins University, Washington Title: Group Vice President Strategy & Policy Development Dean, Ladies and Gentlemen Good morning. I must begin with an apology from John Browne. I am sure most of you came here to listen to him rather than to me. On March 23rd of this year, an explosion in one part of our refinery at Texas City killed 15 people. A number of others were seriously injured. That was a tragedy which was felt across the company right around the world. We have prided ourselves on running safe operations and we believe that the safety of the people who work for us is a prime responsibility of the company. That event was a sharp reminder of the dangers of the commodities with which we are dealing. Over the next few days we will see the publication of the first official inquiries into what happened at Texas City and the next stage of our own internal inquiry into the lessons we need to learn. That is why John is in Texas City today, and not here. I bring his apologies and his hope that you will understand. I went to a performance of an opera in Berlin a few months ago and when it was announced from the stage that Placido Domingo would not be singing that evening a number of people stood up and left the hall. Please feel free to do the same. For me, it is an enormous pleasure to be here, and also somewhat daunting to be speaking at this School which is the foremost centre of studies in International Relations in the United States, and on the basis of the material you publish and the debates which start here one of the most creative and interesting schools in the world. BP is delighted to be associated with SAIS and the work that is done here. The topic today is energy and its role in international relations. That could be a dull, dry subject. Lists of numbers with some arcane arguments about stocks and the evolving pattern of energy GDP coefficients. But I think recent events, and in particular the circumstances created by Hurricane Katrina, have demonstrated once again just how important energy is in the daily life of this country, and indeed every other country on earth, and how much we all rely on the continuity of supplies. Energy provides heat, light and mobility to most of the world s 6.3 billion people. For those who don t have access to energy life is cold, dark and often short. Energy fuels the rest of the economy. Without energy there would be no cars, no internet, no television, no hospitals and no books. Recent events have also demonstrated just how interdependent the world s energy system has become. Hurricane Katrina hit just three US states. But its effects were felt and are still being felt worldwide. The price of oil and oil products went up because of the loss of production and the loss of supply caused by the closure of a number of refineries on the Gulf Coast. The price then went down because the international stock release system coordinated by the IEA worked and supplies of oil products began to flow into the United States from Germany and elsewhere in Europe relieving some of the pressure and some of the shortages which were occurring. The events around Hurricane Katrina reminded everyone both of the importance of energy and of the fact that the United States is part of an international energy market and as a net importer of both oil and gas is dependent on that market. Katrina has also renewed what was already a surging wave of concern about energy security. If you go into the bookshops around Dupont Circle as I did last night you can find a dozen books focused on energy, many of them predicting doom. Perhaps you can always find books predicting doom in an American bookshop but I was struck by the number which now tie that sense of danger and foreboding to energy in general and to oil in particular. Not everyone predicts doom but energy has risen to the top of the agenda in the op-ed pages, in the think tanks and in the academic world and I noted with great interest that even SAIS, which doesn t lightly shorten its skirt to follow fashion, has designated this as a year of energy . I think it s worth examining the reasons behind this trend, and worth asking why energy has suddenly become as fashionable as the latest ipod. There are a number of factors. First, the demand for energy is rising. The world s population is growing. In an hour s time the world will have 10,000 more citizens. A quarter of a million every day. ... and more and more of them have the means to be able to afford energy for their basic needs. On a worldwide basis there are probably an additional 200 million new customers for commercial energy every year. The combination of population and prosperity is the fundamental driver of consumption. Some people hope to see the growth in demand met by a dramatic shift to renewable and alternative sources of energy supply. Solar or wind power, hydrogen, or some other form of supply. In a timescale of ten to fifteen years the shift seems certain to be quite limited. Today all the renewable and alternative sources of supply provide just 2.5 per cent of world demand. By 2020 the forecast is that that will rise to perhaps 3 per cent. One day alternatives and renewables will provide a significant share of the total, but that day is still a long way off. We and others are doing a lot of work in that direction but the processes of research, development, commercialisation and change in the capital stock will take many years to work through. Some people hope to see a significant renewal of the development of nuclear power. That also seems unlikely. No nuclear stations have been commissioned here in the US in the last twenty years and in Europe the outlook is for nuclear to decline rather than grow as a contributor to primary energy demand. Germany has taken the decision to give up nuclear power over the next 15 to 10 years. In the UK the scheduled decommissioning of the first generation of nuclear power stations which are still in operation will bring the proportion of electricity generated by nuclear in the UK down from over 20 per cent today to 7 per cent by 2020. One day nuclear may come back and find a new role as part of the energy balance but for the moment the reality is that we will rely on hydrocarbons and in particular on oil and gas and the reliance will grow. So increasing demand for oil and gas is one factor behind the concern. The second is that the requirement for trade is also growing. In each of the four leading economies of the world the US, Europe, Japan and now China the need for increased volumes of oil and gas can only be met by imports. The US has a very strong energy position with oil and gas in the lower 48, in the deep water of the Gulf of Mexico, and in Alaska. Existing supplies will soon be supplemented by additional gas from Alaska which we in BP hope to bring to market within the next decade. The US is probably better placed than all the other importers. But like them it won t be self sufficient and its import requirements will rise. There is no shortage of physical resources to meet the needs of all the importing regions. The world is not running out of oil and gas. There are decades of available supplies of both oil and gas. At least forty years of oil and at least 65 years supply of natural gas taking into account just proven reserves. Beyond that there is undoubtedly more oil and gas yet to be found and substantial reserves of so called unconventional resources such as heavy oil in Canada and Venezuela which are identified but which have not yet been developed. The only problem is that supply and demand are not co- located. We ve already seen world trade in oil consistently outpace the growth in demand. Trade now accounts for well over half the oil used everyday. By 2015 that could increase to two thirds. That would mean more than 65 million barrels a day of oil traded across an international border before it reached the consumer. At the same time it is becoming obvious that the available resources of oil and gas are concentrated in a limited number of places in Africa, in the Middle East and in Russia. By the middle of the next decade up to eighty per cent of global traded oil will come from those three areas. Some of those places such as Iraq remain, for the moment, beyond the reach of international investment, and in most of the others the resources are held directly by Governments. I find it very striking that our industry is one of the very few businesses in the world where the private sector share of activity is actually declining. The third issue of concern behind the mood of energy insecurity is that there is a need for investment to ensure that the resources which are available are developed and brought to market in good time to meet rising demand. Investment in developing new fields and in establishing new infrastructure such as pipelines and LNG terminals. And the scale of the necessary investment is rising. According to the International Energy Agency the annual requirement for investment in all forms of energy is now around $ 560 bn a year. Of that more than a third is in oil field development and the infrastructure necessary to bring it to market. Perhaps $ 200bn a year. That represents a 20 per cent increase over the level of investment which was being made through the 1990s. Then there is the longer term challenge of the environment. I think the period when people could live in the hope that issues such as climate change would be disproved and go away has passed. If you read the statement published before the July summit by the scientific academies of all G8 countries you will find a cool and rational assessment of the evidence by some of the most authoritative scientists in the world. The science is unfinished of course. There are things we don t know there always will be. But the academicians came to the unanimous conclusion that precautionary action is necessary. The emissions of carbon into the atmosphere are already significantly higher now than they were in 1997 when the Kyoto protocol was signed. And they are set to be higher still by 2010. Climate change is a long term issue, of course, but year by year the point at which we could face the harsh choice of having to take immediate and perhaps drastic action to limit the damage is coming nearer. So growing demand, growing trade, a requirement for increased investment and the need to handle the long term environmental challenge of climate change and global warming. Those are the reasons why people feel insecure about energy. And on top of those long term challenges have come the shorter term issues which have put energy right into the headlines. The fact that a single hurricane in the United States, probably produced by the warming of the waters of the Gulf of Mexico can affect the whole world market as US production and refining is shut in and as product supplies flow from Europe to meet American needs. The fact that prices have risen by 100 per cent over just the last eighteen months to a level as high as anything we have seen since the beginning of the 1980s. And the fact that the conflicting conflict in Iraq is making it impossible to begin the investment necessary to increase production in one of the most important areas of the world. Those are the reasons why people are concerned. And those are the reasons why this is such an important area of analysis for anyone interested in international relations. For the US and for all the other importing regions energy and energy security is an issue of foreign policy. And given the link between energy and the economy this is perhaps going to be not just a minor issue of foreign policy but one of the principal drivers. This is also an issue of foreign policy with a special complexity because it is clear that no one importing region can protect its own security without paying attention to the security of everyone else. The global economy is far more interdependent than it ever has been. To protect our own security at the expense of someone else would serve only to damage our trading partners. To achieve energy security for one country at the expense of others is to invite strategic competition for access to resources, which given the importance of energy to everyone could be a sharp and disruptive process, potential damaging to the whole idea of an open market which has worked so effectively over the last century. Genuine energy security has to be security for all. That sets the context in which to think about each of the foreign policy issues involved. I think those issues fall under three headings. The first is the need to ensure that the areas which can provide the resources we need are willing to invest and are open to the international companies who can provide the resources and technology which is necessary. To achieve energy security in this country for instance investment is necessary not just in Alaska and the Gulf of Mexico, but in areas such as Trinidad which can provide the US with secure supplies of natural gas and in areas such as the Caspian which will soon with the completion of the pipeline from Baku to Ceyhan be providing a million barrels a day or more to the world market. Al those are necessary parts of the story. But in reality energy security is about investment in the areas which can supply even more substantial amounts of oil and gas. That means Iran, Iraq, Russia and Saudi Arabia. Between them Russia and the Middle East hold around two thirds of the identified oil reserves and 67 per cent of identified natural gas supplies and it is the development of those resources which will determine whether energy security is maintained here in the US or anywhere else. In Russia BP has made an initial investment which is proving very successful. Our experience there is of a country which has made enormous progress in the process of transition which began twenty years with Mr Gorbachev s adoption of the new policies of glasnost and perestroika. We find that investment is not only welcomed but embraced as a vehicle through which Russia can develop and modernise its economy and social system. But we and others now need to do more to develop those resources and the question is whether the engagement being created by the private sector will be match by a process of Government to Government engagement. The Middle East remains largely closed to international investment and the development of the resources on which the world will depend lies predominantly in the hands of state companies and their Governments. The International Energy Agency in making its projection of the world s supply demand balance suggests that as soon as 2010, more than 22 million barrels of oil each day will be required from the five Gulf states, with Saudi Arabia accounting for a major share of the increase. That is around 20 per cent more than the level of output now. The question is whether that investment will be made by the Governments of those countries and by the state companies to the scale and pace required and whether those markets will be opened to international companies who can bring both the resources and the technology required. The openness of the countries holding major resources is the first issue where energy and international relations are interlinked. The second issue concerns the security of the suppliers themselves. The discovery of oil is not always a blessing. I think it was Alan Greenspan who said that if the President of a developing country came to him and said that he had found oil he would tell to hide it and to leave it in the ground. Oil and the windfall gains which it can produce what Adam Smith would have described as economic rent can disrupt the balance of a local economy distorting labour markets and currency values and discouraging wider economic activity. In some places the sheer flow of revenue can encourage corruption especially in areas which have limited experience of real development. If we care about energy security we have to be concerned with the process of development in the countries which have the resources we all need. We believe that is about transparency and about providing direct support for the development of local capacity, starting with education. The gains from oil and gas production can and should be hugely beneficial. But we can t assume that those benefits flow automatically. They need a helping hand. That s why we have adopted a policy of transparency, publishing what we pay in the areas which are part of the Extractive Industries Transparency Initiative. That is making good progress and we are delighted with the support we are getting from Governments and state companies. Publishing what you pay is only part of the process. Governments have to publish what they receive and then we all need to understand better the process of development and how the rents received from resources can best be channelled to achieve sustained economic progress. We have taken an initial step in creating a Centre for Revenue Management in resource rich economies at the University of Oxford. That Centre will be completely independent and will offer practical advice to those with the hard challenge of managing development in emerging economies. We hope that work can be directly beneficial to countries which are now receiving sharply increased volumes of oil and gas revenues. To put that in numerical terms if the world price of oil averages $ 50 this year, the revenue going to the oil exporting countries of Africa will, according to the best available estimates be almost $ 50 bn higher than it was in 2003. That flow of revenue offers huge potential but it also of course represents a considerable risk. Transparency of the sort to which we are accustomed here in the US or in Europe should become one of the standards applied by the international institutions in their allocation of support and assistance. For the initiatives which are being taken through Extractive Industries Transparency Initiative by both companies and governments to be really effective the standard of transparency has to establish as central to the system of conditionality through which such institutions work. I believe that would reinforce and provide an additional incentive for countries who working hard to deliver transparency and good governance. There again energy and international relations come together. The third issue is the environment. I don t believe true energy security is attainable if there is a significant chance that by using the energy we all need in our daily lives we are putting at the risk the world s climate. Of course, the science of climate change is incomplete. We don t know everything and we probably never will. But we have to work on the basis of the available evidence and given the weight of that evidence I don t believe we can stand aside and ignore the problem. Precautionary action is necessary and I believe it is also possible. This isn t an insoluble problem. There are things we can do practical steps within the boundaries of existing technology. Improving the efficiency of energy use for instance by improving the average mileage per gallon of fuel from 30 to 60; shifting power generation from coal in favour of natural gas; developing the technology of sequestration the capture and storage of carbon and extending the use and capability of photovoltaics solar power. There s no single magical solution to the challenge of global climate change but there are different answers which can be applied in different countries, and by different sectors of the economy. This is, of course, an issue of international relations which now regularly appears on the agenda of summit meetings. The challenge is not to find a single solution which is universally applicable but rather to develop a framework within which all the efforts being made can be valued and a system developed to enable us all to achieve the objective at the lowest possible cost. The emissions trading system being developed by the European Union is a good step in that direction. So are the initiatives being taken in different parts of the United States. This requires a new form of agreement the creation of a framework and a market designed through the establishment of a basic target to incentivise the users and producers of energy to find ways forward using their own ingenuity. The gradual evolution of that debate isn t just a fascinating study in international relations the challenge is real and the time for engagement and action is now. Climate change is a long term problem, but all the evidence suggests that if we delay and do nothing the costs of responding will grow and could be damagingly high. So in all these areas energy is part of the agenda of international relations. On each of the three issues I ve mentioned the environment, the security of the oil and gas exporting countries and the need to encourage long term investment in the development of the resources which are needed there are challenges but there are also ways forward. There is room for optimism as well as concern. We needn t live in a climate of energy insecurity. What is also notable is that in each area the challenges require the active engagement of both the public and the private sector. The private sector can provide the investment dollars, the trading skills, and the experience in developing resources and infrastructure. The private sector can also use its skills and access to technology to offer better choices to ensure, for instance, that there need be no trade off between using energy and protecting the environment. One of the great advantages of having large global companies in the oil and gas business is that we can spread risks and share knowledge. They have the financial capacity and the accumulated experience to take on the challenges. But we can t succeed on our own. Energy security isn t a challenge which can be solved by the private sector alone. In each of the areas I ve mentioned the actions business can take requires complementary actions by Governments. We need a framework in which to invest and operate, and we need the right incentives to be in place. We need an open trading environment in which capital and technology can move easily in response to need. Only Governments can create that environment. And we need the pattern of incentives which stimulate the research and innovation required to reduce the environmental risks at the lowest practical costs. Only Governments can set those incentives. Just as energy security can t be achieved in one country or delivered simply by military means not equally can it be achieved simply through the work of private companies and investors. Public policy and private investment go together nationally and internationally. Energy is a business which involves every country in the world and many, many different aspect of human activity science and economics, politics and, of course, the relationships between nations. It s a very complex subject with no simple answers but a subject eminently suited to the multiple skills of an institution such as SAIS. It s been a great pleasure to be here. You ve been very kind in staying to listen to a struggling understudy. Thank you very much. back to top 1996-2005 BP p.l.c. | Legal Notice | Privacy Statement BP Global/Press/European Energy Security Site Index | Contact us | Reports and publications | BP worldwide | Home Search: About BP Environment and society Products and services Investors Press Careers BP Global Press Speeches Press Releases Images/Graphics Features and news Speeches European Energy Security Speaker: Nick Butler Speech date: 17 September 2005 Venue: International Institute for Strategic Studies, Geneva Title: GVP Strategy & Policy Development Let me start with some basic facts. Today the 22 countries of Europe 1 using for the purposes of this discussion OECD Europe as the definition of the boundaries will use some 37mmbdoe of energy 2 40% of that will be in form of oil; 24% natural gas; 12% nuclear power and 18% coal, with renewables including hydro electric power providing the remaining 6 per cent 3 Of the total energy consumed 60% will be supplied from within the 22 countries with the remainder, mostly in the form of oil and gas imported principally from Russia, North and West Africa and the Middle East 4 Those are the dry figures, but as recent events in the United States in the wake of Hurricane Katrina have shown energy is at the heart of economic activity and its supply is dependent on a complex web of supply systems. The 37mmbdoe of energy 5 used each day in Europe sustains every aspect of human activity from food production to industrial power to the generation of electricity to heat and light every home and office building. The supply which we have perhaps come to take for granted flows through tens of thousands of miles of pipelines, 115 refineries 6 across the continent, hundreds of power stations and a complex electrical grid. Without either the supply of energy or the continuous operation of that distribution system the European economy would grind to a halt. There are many aspects of security including the physical security of infrastructure, the integrity of the distribution systems across Europe and the use of strategic stockpiles and reserves to cushion short term disruption. I will concentrate in accordance with the theme of this conference and the work of the Institute as a whole on the international aspects of energy security. The reality is that Europe is not self sufficient in ene