BP: Beyond Petroleum and Back

There is an interesting article in Wednesday’s FT describing BP’s trip “beyond petroleum and back again”. Having staked out the greener high ground of being the multinational oil company most devoutly search for alternative energy solutions, it is now seemingly retrenching, what with close its London office devoted to some such programs, as well as reputedly refocusing internally on petroleum and natural gas investments.

The piece carries many morals. First, it shows that alternative energy remains no cakewalk. Despite the massive capital budget of BP, and despite its vested interest in diversifying beyond fossil fuels, it has struggled to get even a fraction of its revenues from anything other than petroleum and natural gas. Second, the story reminds how difficult it will be for oil incumbents to avoid the Lorax trap of ever-enhancing extraction technology, thus making the eventual depletion curve for resources sharper and more calamitous.

Either way, the piece does contain the following nice figure comparing oil reserves claimed by various MNOCs worldwide:

Comments

[Tony Petroski:]

I'm shocked. An oil company returning to a focus on oil? Next we'll be hearing about car companies wanting to build cars.

Jul 08 04:41 PM

[JER13071946:]

Does this tell anyone about the free enterprise system? Does anyone want to work for nothing? Would anyone "avoid" profit if you had a choice? If "alternative energy" was economically viable, people would be doing it! It is NOT viable for today's world. Only rich people can afford to install wind generators and enough solar panels to do any good - because they don't care if it makes economic sense - they are doing their part in response to the insane "Gorists/Gia" religion. God it would be a better world if people had a solid science education.

Jul 08 05:37 PM

[UncleFrank:]

. . . and a solid economic education!


On Jul 08 05:37 PM User 362519 wrote:

"God it would be a better world if people had a solid science education."

Jul 08 05:42 PM

[Socialism c...:]

Why should BP invest in alternative energies, at a time when our government is getting into that biz? You can't compete against the government printing press...and I seriously doubt BO intends to throw money in the direction of the oil companies. No, his plan is to subsidize competitors to the oil majors, with the goal of killing them off. Go BP!!!

Jul 08 05:53 PM

[bluehorsesh...:]

Cobra Oil & Gas Co (CGCA.OB) has entered the EXXON lease area in Utah and gained a 10 million dollar start up loan to extract up to 4 1/2 million barrels of oil out of the surface rights...has to pay EXXON .125 royalty fees and break even point is $25/barrel oil, time frame is six months to start production with new environmental friendly extraction process...could this beginning of the answer to staying with our home resources and the end to foreign dependence on oil? See www.cobraoilgas.com.

Jul 08 07:31 PM

[Alan von Al...:]

Paul, cut proven in half to get recoverable, then cut it half again to discount their blue sky reservoir modelling and political risk.

Jul 08 08:43 PM

[rooferguy:]

Rich people started buying cars in the early 1900s -- everyone else used horses or walked. But the car industry steadily became quite economically viable (OK, until recently).

Rich people started buying TVs in the 1950s -- now they're in our telephones.

Rich people started buying expensive PCs in the 1980s, and went on the internet first in the 1990s. Now that's pretty much how the world operates.

New technologies are expensive. Early adopters are not insane, as you imply.

Many forms of alternative energy are solidly economically feasible right now and cheaper than traditional forms of energy. And as costs continue to come down (while fossil fuel costs go up), the economic advantages of alternative energy will improve, just as cars, TVs and computers did.

I'm not a gorist/gai/eco-freak. I have a Masters Degree....In Science ;)


On Jul 08 05:37 PM JER13071946 wrote:

> Does this tell anyone about the free enterprise system? Does anyone
> want to work for nothing? Would anyone "avoid" profit if you had
> a choice? If "alternative energy" was economically viable, people
> would be doing it! It is NOT viable for today's world. Only rich
> people can afford to install wind generators and enough solar panels
> to do any good - because they don't care if it makes economic sense
> - they are doing their part in response to the insane "Gorists/Gia"
> religion. God it would be a better world if people had a solid science
> education.

Jul 08 09:35 PM

[buoy:]

Here's the deal with energy, any energy...it has to be CHEAP.

Jul 09 08:09 AM

[flying breeze:]

So what are the costs of fossil fuels vs renewables? It is the cost structure that is being redefined at the moment. Fossil fuels now have to add onto their list of expenses:
-green house gas production mitigation
-carcinogens and national health costs
-loss of local/national employment (economic leakage)
-economic risk from price volatility and foreign control

Renewables can subtract from their costs or add to revenue
-partnership relationship with energy efficiency and conservation programs which have the greatest potential to reduce user costs
(think smaller cars and more home insulation)
-import reduction
-proven long term cost reduction curve and price stability

Jul 09 08:41 AM

[long_on_oil:]

Personally as a BP stock holder whose retirement income is tied to the BP dividend, I hope the company does what it needs to maintain and increase the dividend. Bottom line, most individual stock holders buy stocks for their own self interest and when BP lets the stockholder down they are forced to reverse directions or suffer the consequences.
The lowest cost producers of oil (Saudis) have big smiles on their faces because they are forcing their competitors (oil sands and deepwater) out of the business. Plus the Saudis ability to produce oil for $3 or less a barrel, will kill alternate sources of energy.

Jul 09 09:23 AM

[William Taylor:]

Jer, you are, of course, correct but people do not wish to see the truth. Alternative energy is not viable at this time nor in the immediate future without massive government subsidy. That does not mean we should not try and make it viable. So let's take money from the defense department and do some more energy research on safe nuclear fuel reprocessing.


On Jul 08 05:37 PM JER13071946 wrote:

> Does this tell anyone about the free enterprise system? Does anyone
> want to work for nothing? Would anyone "avoid" profit if you had
> a choice? If "alternative energy" was economically viable, people
> would be doing it! It is NOT viable for today's world. Only rich
> people can afford to install wind generators and enough solar panels
> to do any good - because they don't care if it makes economic sense
> - they are doing their part in response to the insane "Gorists/Gia"
> religion. God it would be a better world if people had a solid science
> education.

Jul 09 10:02 AM

[Ferdinand E...:]

BP knows what it is doing, and please remember that the former director of BP - Lord Browne - said that he was wrong about cap-and-trade. That should have been enough for the US Congress to reject that scam - but evidently it wasn't.

Jul 09 10:33 AM

[long_on_oil:]

Before Obama is out of office our defense systems will be down to bare bones so you can not steal money from defense. Obama is doing to defense what Carter did, so hopefully we will get another Reagan to correct this injustice.
The primary job of government is to protect the citizens via a strong national defense. Do you feel safer now that Obama is President?
If, after hearing the speech Obama made recently in Russia, you feel safe, you must be living in a cave.

Jul 09 02:17 PM

[User 422955:]

TOO GOOD TO BE TRUE? I like to check it out. Bluehorseshoesez posted his/her first comment on Jul 8 @ 7:31 p.m. S/he says that Cobra Oil & Gas will soon produce oil in Utah at a break even of $25./bbl. This oil is in tar sands. I have no idea what the break even for oil from tar sands might be.

This oil, however, requires a lot of water. Utah is mostly desert; the water for much of the state comes from the Colorado River/Green River basin. All of this water, and more, is already spoken for.

Cobra Oil and Gas has been trading for less than a month. Buyer, beware.

Jul 09 07:11 PM

[Road Runner:]

long_on_oil said, “The lowest cost producers of oil (Saudis) have big smiles on their faces because they are forcing their competitors (oil sands and deepwater) out of the business. Plus the Saudis ability to produce oil for $3 or less a barrel, will kill alternate sources of energy.”

But, the Saudis can not pump enough cheap oil to meet all the world’s oil needs. This is where an understanding of economics comes in. (Since we’re bragging about our degrees on this post, I’ll join in. I have an MBA from the University of Texas at Austin so I understand economics). The price of oil in the market is the cost of the most expensive barrel produced to match demand at that price. In other words, it may take $100 a barrel to give enough incentive to produce enough oil to match demand at $100 a barrel. This most expensive barrel of oil may come from the deep ocean, from Canadian oil sands, or from Western US oil shale. And, it may take expensive oil, $100 or above, to curb the appetite for oil enough to let these other sources of oil ramp up production to match the constantly rising (except for the 1 to 2 years during this financial crisis) world demand for oil.

Thus, we are far from running out of oil in this world, but we have definitely run out of enough cheap oil to keep the price of oil cheap.

Jul 10 05:24 PM

[Obamitall:]

We already have safe technology for nuclear fuel use. But the green rads still remember Three Mile Island,and politicians won't venture there for reelection reasons.
As far as the defense budget, it is only 4% of GDP, but the first place liberals look to gain fiscal accountability.


On Jul 09 10:02 AM William Taylor wrote:

> Jer, you are, of course, correct but people do not wish to see the
> truth. Alternative energy is not viable at this time nor in the immediate
> future without massive government subsidy. That does not mean we
> should not try and make it viable. So let's take money from the defense
> department and do some more energy research on safe nuclear fuel
> reprocessing.

Jul 11 07:36 AM