By Steven Mufson and Juliet Eilperin
Washington Post Staff Writers
Wednesday, August 9, 2006
Sitting in his Madison Avenue offices two weeks ago, with contemporary art on the walls and a commanding view of Midtown Manhattan, BP PLC chief executive John Browne was asked about the different images of BP, then the world's second-largest oil firm, and its larger rival, Exxon Mobil Corp.
"It's not a matter of competition," Browne said. "It's a matter of different character."
Now the character of BP is being tested. On Sunday, the company revealed that a March oil spill in Alaska stemmed from pipeline corrosion so widespread that BP will suspend all production in Prudhoe Bay, the largest U.S. oil field, while it replaces 16 miles of pipe.
The pipeline fiasco has dealt a particularly hard blow to BP because it has smudged the company's environmentally correct image. For the past seven years, the company has trumpeted its concern for the environment in ads like ones that say, "It's time to turn up the heat on global warming," or "It's time to think outside the barrel." And when Browne talks about "values," he is talking about principles and ethics, not stock values.
Now critics allege that BP neglected its pipelines for years and that its corporate culture fostered disregard of warnings about maintenance. Members of Congress have called for investigations and tougher federal oversight. Energy Secretary Samuel W. Bodman said yesterday that it could take BP six months to get Prudhoe Bay back to full production. And BP's rank among publicly traded oil companies slipped to third as its stock price dropped, pushing its market capitalization below that of Royal Dutch Shell PLC.
On anxious oil markets, prices edged down only slightly yesterday, to $76.31 a barrel on the New York Mercantile Exchange.
In the world of corporate image making, BP's image campaign is still viewed as a striking success. After British Petroleum acquired Amoco and Atlantic Richfield Corp. in 1999, the company needed to rebrand its new U.S. subsidiaries. Abandoning the name British Petroleum and trademark shield, it asked a big ad firm to come up with a new sunny logo and simplified its name to BP, which it said stood for "beyond petroleum."
Ogilvy Public Relations Worldwide uses the campaign it coordinated as a case study. "The rebranding entailed the introduction of a new visual identity . . . designed to help BP transcend the oil sector, deliver top-line growth and define the company as innovative, progressive, environmentally responsible and performance driven," Ogilvy's Web site said. The ads won two PRWeek magazine's campaign of the year awards in 2001.
Browne gained an element of celebrity unusual for oil executives. Vanity Fair featured him in its recent "green" issue, along with celebrities such as Ed Norton and Julia Roberts.
"Their campaign worked. You can argue on whether they're green, but they've clearly gained brand trust and brand value," said Andrew S. Winston, co-author of the upcoming book, "Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage."
In the oil business, some executives are green with envy over the greening of BP's image. Many claim that there is more packaging than substance to BP's claims of concern and that BP inflates the $1 billion a year figure it says its spends on alternative energy by including co-generation projects common in heavy industries. Exxon, for example, spent $1 billion over the past two years on co-generation.
Even $1 billion is a small fraction of the $16 billion BP plans to invest in oil and gas operations this year. David Hamilton, Sierra Club's global warming and energy program director, points out that BP's investments in alternative energy amount to 5.7 percent of its annual capital spending.
But BP's alternative energy division also includes wind farms in the Netherlands, a hydrogen power plant in Scotland, and a solar firm that is the second largest in the United States. And the company has lowered its own greenhouse gases to 10 percent below 1990 levels, in line with the Kyoto Protocol and beating the protocol's deadline by several years.
In an interview in New York, Browne said that BP's concern is real. "If this is PR, I can think of a much cheaper way of doing it," he said. "BP spends a lot of time developing and thinking and doing things about what it actually stands for because it believes, we all believe, that it's the right way to do business and gain more business."
In fact, the distinction between BP and other oil companies on environmental issues predates the rebranding campaign. In 1997, the Cambridge- and Stanford-educated Browne broke with other oil industry leaders by declaring that to ignore climate change warnings "would be unwise and potentially dangerous." He ended the company's financial support for an organization that questioned climate change science. (Exxon still funds the group.)
Activists give BP credit for efforts it has made to reduce its impact on the environment, whether through increased energy efficiency, investments in renewable power or refusing to drill in environmentally-sensitive areas. Since 1998, the company has saved $1.5 billion by cutting millions of tons in carbon emissions, and in March BP pledged not to explore for energy in regions critical to wildlife.
Browne is sounding themes similar to those he hit in 1997. "We have to think about why everyone thinks there's a tradeoff between energy and environment. Can we narrow the gap? Because we need both," he said.
Though Exxon's chief executive, Rex W. Tillerson, says companies need to explore energy alternatives, he does not apologize for Exxon's approach. "Fundamentally . . . we've got a business to run first," Tillerson said at the company's May 30 annual meeting in response to a shareholder's question about the company's alternative energy spending. Tillerson said existing technologies were not good enough anyway. Exxon gives about $10 million a year to a research institute at Stanford University and says it is working with Caterpillar Inc. and Toyota Motor Corp. to come up with a more efficient internal combustion engine.
Tillerson is also sticking to his determination to question scientists who say carbon dioxide emissions are causing global warming. "We think it's important that there be a very meaningful debate about it," he said at the annual meeting. "And it ought to consider all the skeptics because skeptics sometimes identify an issue that hasn't been thought about."
In a speech delivered two weeks later, Browne said that when companies denied that climate change was a serious issue and said there was nothing business could do, "it gives business a bad name."
Now, however, BP has to restore its tarnished name. In addition to the pipeline problems, BP is still sorting out repairs and lawsuits from a 2004 explosion that killed 15 people at its Texas City, Tex., refinery.
Some other oil companies worry that BP's problems at Prudhoe Bay will cast a dim light on the industry, damaging chances to convince Congress to permit drilling in the Arctic National Wildlife Refuge (ANWR) or allow the construction of a natural gas pipeline in Alaska.
On this issue, too, BP already parted ways with the oil industry. In 2002 the company pulled out of the main ANWR lobbying group, Arctic Power, and in March 2004 BP board chairman Peter Sutherland declared that drilling on ANWR's coastal plain "is not part of our current business plan."
"They decided the economic gain wasn't worth the political risk," said Athan Manuel, who directs lands protection for the Sierra Club and who negotiated with BP officials over drilling in ANWR several years ago.
Like many environmentalists, however, Manuel gives BP only a qualified endorsement. "Compared to their colleagues in the oil and gas industry, they're the best," he said. Manuel added, however, "Being the best of the oil industry is like being the smartest of the Three Stooges. At the end of the day you're Moe, you're still a stooge."