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Date: 2024-05-23 Page is: DBtxt003.php txt00025215
ENERGY
BP ENERGY OUTLOOK 2023

The energy industry has enabled huge benefits and economic progress but massive negative impacts have not been accounted for!


Original article: BP-2023-energy-outlook.pdf
Peter Burgess COMMENTARY
The big ... giant ... oil majors dominate the world economy in a way that few really understand. Perhaps I know more than most, but I am well aware that I know rather little of the overall energy ecosystem and all the levers of power.

In 1967 when I first lived in the USA, I worked in Channelview, a suburb of Houston, Texas. I was not working in the energy industry, but working for a Canadian consulting company managing a pulp and paper mill project being constructed by Brown and Root (B&R).

Though I was only in my 20s, I was fairly good at my job as a 'field accountant' for this project. Quite early on, I concluded that B&R was padding the payroll to a massive extent and did a small but rigorous comparison of the agreed budget and the prevailing deployment of workers and their costs!. I concluded that the project was heading to a 100% cost overrun unless some major changes were made. This was a 'cost plus' contract and B&R stood to profit mightily if they 'padded the payroll! I showed my study to my manager ... an experienced construction consultant and manager who grilled me for about three hours, at which point he called the B&R construction manager to arrange a meeting next morning to discuss the issue. I joined this meeting which happened on a Friday. That day there were in excess of 1,500 workers on site ... after the meeting B&R reorganised their work program and on Monday there were just 700 workers on site. When the contract was completed, the project had a 5% cost overrun ... an excellent result for the time when year on year cost inflation was running in excess of 10%.

Though i was not working in the petroleum sector, I got some feel for the character of the energy industry specifically in Texas but also more generally around the world. About two decades later I was responsible for establishment of a shrimp fisheries project in the Niger Delta of Nigeria ... an area where the dominant industry was oil extraction just as it was in Texas!

Our company had very high ethical standards and all our local collaborators also embraced best practice ethics ... even when this was something of a challenge. At the time, Nigeria had a military government and our project had some government ownership ... but despite this our standards remained at the highest possible level. Interestingly, this was respected by almost all the Nigerians with whom we interacted because it was so much easier to do business with us than those that had rather compromised standards.

One of the business folk in Nigeria that I interacted with was trying to 'sell' me (our company) insurance. He took me to the Island Club in Lagos to impress me, and while it was a fascinating evening, it did little to sell insurance. I bring it up because it was a very memorable evening with a huge number of club members being feted by three high profile Nigerians seeking to get support for their respective elevation to 'Chief' ... but there was also the matter of an Island Club member who had just been arrested for the assassination of President Murtala Mohammed about a month before.

I did a variety of small assignments in Nigeria for various international organizations. During one of these assignments I became aware of the practice of promoting massive projects not so much for the social or economic value of the project for a company or for the nation, but rather for the flow of commissions that could flow to the promoters. One of these was a very expensive oil pipeline that was built between somewhere in the south to somewhere in the north with no purpose other than the flow of commissions! Nigeria had a lot of money ... but rather little of it was used to improve the things that were important!

Quite recently I had the chance to ask a question of the former CEO of BP. My question was about the environmental damage that had been done by the oil industry and whether there should be some sort of funding to compensate those that have been damaged by the various impacts of the energy industry along the lines of the tobacco industry! The response was interesting ... and super slick. The event was at Columbia University in New York, and all the students understood the former CEO's response and understood what I was trying to do. Bottom line, I want to argue that a big proportion of the profits in the energy industry should be diverted into a fund to pay for all the things that need to be done to get to a sustainable world!
Peter Burgess


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