The past decade has been a turbulent one for the London-based oil and gas major BP, from the serious Deepwater Horizon accident that brought the company to the brink, to navigating its troubled relations with Russia and the oil price collapse of 2014, to charting a path forward - now toward a lower-carbon world to address the challenge of climate change.
In this edition of Columbia Energy Exchange, host Jason Bordoff is joined by BP’s chief executive, Bob Dudley, who has been at the helm of BP for the past decade, and is the first American to head the company. He started his career in the oil and gas industry forty years ago with Amoco Corporation as a chemical engineer. Amoco was then acquired by BP, and Bob took on a number of roles, including working for Lord John Browne, managing BP’s alternative energy business around the time that its Beyond Petroleum Initiative was launched, heading the unique Russian joint oil venture called TNK-BP, and leading American and Asian activities.
Bob is credited for stabilizing, and indeed saving, the company at a pivotal time. Nearly a decade on, BP has emerged as a much stronger company, trying to navigate a rapidly-changing energy landscape, and deal with new pressures, including diversifying into clean energies and figuring out how an oil and gas company responds to climate change.
Bob Dudley steps down as CEO next week, and Jason sat down with him at BP’s London Headquarters to reflect back on his career, and to look ahead on where the company, and the energy industry, may be going.
Jason Bordoff: Hello and welcome to Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University, I'm Jason Bordoff. The past decade has been a turbulent one for the London based oil and gas major BP from the Deepwater Horizon accident that brought the company to the brink, to navigating its troubled relations with Russia and the oil price collapse of 2014, to charting a path forward, now toward a lower carbon world to address the challenge of climate change and at the helm of BP for this entire decade has been its chief executive Bob Dudley, the first American to head the company.
He started his career in the oil and gas industry 40 years ago, with Amoco as a chemical engineer. Amoco was then acquired by BP and Bob took on a number of roles including working for Lord John Browne, managing BPs alternative energy business around the time that it's beyond petroleum initiative was launched, Heading the unique Russian Joint Oil Venture called TNK-BP, and leading American and Asian activities. Bob is credited for stabilizing and deed saving the company at a pivotal time and nearly a decade on BP has emerged a much stronger company now trying to navigate a rapidly changing energy landscape and deal with new pressures, including diversifying into clean energies and figuring out how an oil and gas company responds to climate change.
Bob Dudley steps down as CEO after a decade on February 4th, and I sat down with him at BPs London headquarters to reflect back on his career and to look ahead on where the company and the energy industry may be going. Bob Dudley, thank you for joining us on Columbia energy exchange making time for us and your final weeks on the job as CEO of BP.
Bob Dudley: Thank you, Jason. This is quite a bit to do here and it's going to come up really fast.
Jason Bordoff: Well, we're not gonna have nearly enough time to talk about how much there is to discuss in your remarkable career where it's hard to see on a podcast, but we're sitting in a conference room at BP. There's a timeline of BPs history on the wall and I'm going dating back to the founding of the company and discovery of oil in Persia in 1908 and I'm just struck by the fact that roughly half the items on this list you kind of cover part of your career since you joined the company with the acquisition of Amoco, but let's start with your story before even BP, you I think almost went into the military if I'm correct, but what drove you to join the oil and gas industry, what was appealing about that to you?
Bob Dudley: So, I almost I did actually start at the Naval Academy in the US, had an injury very, very shortly after being there and went back and studied engineering, but I went into the oil and gas industry really for one reason and one reason only, which was to see the world and so I looked around and said what are the kinds of things you can do with that as an engineer, diplomatic or, probably not and the oil and gas industry, to me was fascinating. It was everywhere. It wasn't just in capital cities, it was in remote parts of the world and it's always been deeply exciting for me.
Jason Bordoff: And you've been able to see a decent amount of the world and travel to lots of places over the course of your career. Do you see--do you think the industry still has the same appeal to graduates as when you first joined or sort of hear now that as people think about issues of climate change, that it is more difficult to attract talent? Do you see that or not?
Bob Dudley: Well, the world has certainly changed since joining in 1979. I mean, a lot of things haven't changed, the geopolitical nature of oil and gas and energy in general, and I do look at companies like the BPs of the world and the other big companies of the world as energy companies, not just oil and gas now broadening out, and it is everywhere. It probably doesn't have the same cachet as the new technology companies and some of the things that are happening and the size and the market capitalizations and relationships to the size of markets is lower. But it's still vitally, vitally important to the world, it's sort of the lifeblood, energy is also the lifeblood of making things happen around the world and that's still clearly in place. I'm not worried about attracting young talent and people into it because it may not be from California or East Coast of the US or parts of Europe, but the amount of talent and people that do want to join the industry globally is still off the scale for what we could ever employ.
Jason Bordoff: So I'm gonna come to sort of where the industry is headed. Some of the things maybe what if we come back two decades from now and this is extended here on the wall where the company goes from here, but let's start with a couple of the highlights, again, kind of looking at this history of BP that you were involved with, so in the 1990s, you moved to Moscow with Amoco, later became President and CEO of the Integrated Russian Oil Company TNK-BP, the 50-50 joint venture with BP, how has Russia changed since you first moved there?
Bob Dudley: Well, it's a good question because it has changed remarkably, a lot of the world changes, but I think Russia has a certain mysteriousness about it that people probably don't see and I do encourage people to go to Russia and actually see the changes and what it's like, because I'm sure if you've never been there, it's going to be very different than what probably some people think. So in the 90s, I was there, it was the first time with Amoco, doing business development and working on the opening up of what was the former Soviet Union and I would say at that time, it was more chaotic. The industry itself was not very consolidated. There were companies all around in the regions of Russia and Siberia, and it felt a little lawless I would say back then. Russia was finding its feet in the world of new capitalism. A lot of the rules were still developing and it was quite chaotic, and I left and we lived there from 1994 to 1997 with my family and children and moved out in 1997, never thought I would move back under any circumstances that I see something that would ever take the roads back to Russia. So after that after the mergers,
Jason Bordoff: And with the acquisition
Bob Dudley: With Amoco, BP, and ARCO and all that great consolidation of the industry, which was kicked off at that time, remarkable change in the energy industry at that time and then I was asked to go back, while I was actually working on negotiating purchase of Russian companies and then never assumed that I would be asked then after having worked on and help create this concept of this big joint venture, I was never thinking I would actually be asked to go and run it, so when I went back in 2003, the country was very different because there had been much more consolidation rules and law by the government and that was actually the very beginnings of the post Yeltsin years with Putin, so it had a very different feel to it and it was also with the price of oil rising in the 2000s, prosperity was coming into the country, so two very different experiences, both with my wife and kids. In fact both my children graduated in high school there.
Jason Bordoff: And how did that feel living with them at the time, I mean, you famously had to sort of leave the country in haste, you can maybe tell us about the circumstances of that?
Bob Dudley: Well, I think there's a bit of urban myths about it, but yes, that was not actually difficult I would say with the Russian government, it was a business dispute and I was there not actually only working with BP, I had been asked to step out of BP and be the CEO of a company that was 50% BP, 50% three Russian partners, and it was a business dispute and I in many ways, just got caught in the middle of it and in order to sort of protect the rights of the company, I left with the CO’s and the standing of the company and
Jason Bordoff: You didn't feel you were personally at risk, there was different reports about what was happening at that time.
Bob Dudley: Well, it's a period I never talk about and I shouldn't talk about it, but I was a bit nervous at times and I went into hiding for about six months and kept the company running with CO’s and _____ [00:08:24] and documents, because one thing about Russia, follow the rules of regulation and law is very important. So when the partners all resolved it, then I came out, and then came back into BP after that. But for all that adventure, still have deep relationships and warmth for people in Russia and many, many friends there.
Jason Bordoff: And what did that experience teach you about doing business in Russia and about operating and emerging economies more generally?
Bob Dudley: Well, I think it taught me one thing that was really interesting above all that fundamentally, is one thing if you are a shareholder in a company, but when you're working with people who actually own half the company, they treat the company as what the company's spends is their money, so it taught me a very different view of working in a company that all of us who work in companies and have shares, we actually represent the shares in the company, so basically it taught me really well to spend the company's money as if it was your own and I think that's an important philosophy for any large company and its employees and executives, so it gives you a different look at what were your responsibilities are, as an executive and employee.
Talk about an emerging economy, I think Russia was one of the fastest changing emerging economies I think we've seen and with a very short period of time, complete change of government, largely without lots of conflict that there's a way through it and it taught me the importance of the other thing I deeply learned in that is the importance of governance. So, how you work in an emerging economy and the role of companies and the great things that they can do, because they can change many, many things and influence things with the right governance, so that was important and it also was a great example, if you're in the energy industry, the importance of resources to many, many countries around the world, and in many countries, oil and gas is the oftentimes the primary generator of wealth and prosperity, so it was a great frontline experience, not working with only a group of expatriates, but actually working with, you know, many, many Russians and partners is different than maybe the traditional go in and build a big project. It was quite fundamental about companies and how you operate and of course, the great importance of cultural integration. That's one of the things that I think the big energy companies, oil and gas companies have people that need to work around the world and always think about integrating and putting yourself in the shoes of other people is important.
Jason Bordoff: So also on this timeline, there's the Stanford speech. There's BP rebrands, so in the late 90s, you worked with Lord Browne, managing the alternative energy business around that time the Beyond Petroleum initiative was being launched. Rebranding the company is not just Oil and Gas Company, but an energy company, so as BP again starts to develop its operations and power, and in renewables, what lessons do you think you've learned from that first go around for the company moving forward?
Bob Dudley: So Lord Browne, or John Browne, very visionary in 1997, giving that speech at Stanford, which said, we couldn't be sure about climate change, not sure, but we can't risk not considering it, and then began to move the company in that direction, strategically. It clearly it was ahead of its time because the basis of that strategy was that oil and gas would still be important, but that policymakers, governments, markets, would encourage they develop of that kind of energy.
Jason Bordoff: Was he right to be ahead of his time in retrospect?
Bob Dudley: Well, he was certainly right, that this was going to be an issue certainly foreshadowed that climate change was in fact a reality.
Jason Bordoff: I meant, was it right to sort of be ahead of where the industry is? Did he speak too soon? Was the industry ready to go where he--what he was saying?
Bob Dudley: In hindsight, no. Was he right to do it? Yes. Had he been right in terms of governments and regulations and policymakers getting behind it, consumers and markets, it would have been a brilliant strategy. In many ways, society did not follow that and it cost a lot of money, so I was asked to head up a renewables and alternatives group, started the wind business. At that time BP was the third largest solar development company and producer of panels in the world with a combination of BP and Amoco solar businesses, that clearly financially was difficult and very challenged and so BP actually wrote off a lot of investments there, but we learned a lot. We kept the capability of the technology and the experience inside the company and even after our difficulties in the Gulf of Mexico, did not exit those businesses, thinking that they were still going to be important.
We did solar for a while, so the industry at that time was divided, I would say about this, and so BP was ahead of its time. I don't regret that for a minute and neither does John Browne and neither do our employees who thought that was a unifying position to take early on that has remained in the DNA of the company, but other things we learned is you do need to be careful. You can move very, very quickly into certain technologies and find out they don't work, so I would say today we have a big renewables business. Probably 8000 people get up every morning and BP to work in various kinds of renewables and technologies. So people who say it's complete green washing, what we do that's absolutely wrong. I've invited some people to come to a stadium and you stand up and tell people what they do every day is a green washing exercise, but you got to measure the pace of which you change. So, I think there's a great portfolio shifting that's going to come over the next couple of decades and so learning that pace and not getting too far out in front of it because we are a business, we have shareholders, we have to invest the capital wisely, is something that also remains deeply with the company.
Jason Bordoff: So does that just, I mean in terms of the lessons learned, you made the point that it was ahead of where not just the industry was, but where society and policy ended up going is that make you more cautious today about the pace at which the company thinks about moving in that direction. There's pressure on companies like BP to show that long term investment plans are aligned with two degrees on these targets. Even though, most nations not just a Trump administration, most nations policies are not yet ambitious enough to meet those targets, so what does that mean for how fast a company like this thinks about moving?
Bob Dudley: Well we certainly need to move fast and change our mindset to adopt and invest in new kinds of things and experiment, maybe small and then, for us, given our challenge decade after the events in the Gulf of Mexico. I'm of the belief if we understand where the technologies are going and we invest, the best thing we can do strategically is have a very strong balance sheet, so then when it becomes really clear, certain technology is going to move very quickly and be profitable, then we'll be able to make that shift. So I'm not worried that we may not be fast enough turning over the portfolio, it's more making sure our balance sheet is strong and then we'll be able to move in these areas.
Jason Bordoff: Let me ask you about a couple of other career points and then come to these issues of how we think about the energy future moving forward issues of climate change. You mentioned the Gulf of Mexico and Deepwater Horizon is up on this timeline as well, so you're elected to BPs board with broad responsibility for the Americas and Asia and then in charge of the cleanup and restoration efforts after the Deepwater Horizon accident, so sort of talking about trial by fire taking over the helm of this company in that moment, just reflect back a little bit on what that experience was like?
Bob Dudley: So I had come back to BP in sort of an ambassador role, not managing operations after Russia and just go to say getting re-feedback on the ground after that experience and then was asked to travel to the Gulf. We all saw the accident and knew it was significant and important BP through people and all efforts to it and I was asked to step into this role. It was not a role I was seeking at all, but was asked to step into it in the middle of a real crisis. I mean, a serious crisis, the confidence of
Jason Bordoff: The worst of the company's history.
Bob Dudley: I would, I think it was. I think it came very close, our debt became untradable. When that happens, very few companies return from that. We became the focus of 24-hour day media. Literally, it was on the screens of the subsea well, with its leaking modern gas and oil 24-hours a day, so confidence quickly was eroded, there was very little political support.
We began to manage and was sort of taken over by the US Coast Guard managing a 55,000 people response to it, people all across the Gulf of Mexico, just being on beaches in case something happened in large centers and so working through that and working through the technology and the options of it was a 24-hour day Crisis Center in Houston, where there were as many US government officials as there were people from BP and the industry was a remarkable experience and so stepping into it, I think the thing I learned is all you can do in a crisis is you have to communicate constantly and frequently, not only with your own employees, but externally and really the best you can do is say, here's what I know, here's what I don't know, and here's what we're going to do, and just do that over and over and over to allow people to have the confidence to let us keep going to solve that engineering problem and it was a remarkable engineering feat and it's changed the industry now because the industry has developed techniques and tools to immediately respond to capping things if they ever happen again, but in the end it was the finding a cap on the well and then drilling down about two and a half miles down around the original well in a corkscrew and effectively hitting this a teacup with the accuracy of penetrating it and then finally killing the well for good, unbelievable engineering feats and
Jason Bordoff: What do you think BP got right and got wrong when you look back now on that experience?
Bob Dudley: So, in hindsight, you go back through critically difficult time and what was done, so what did BP get right was get through massive amounts of talented people from all around the world in the company and work closely with the government to eventually stop the leak and do the cleanup. I think one of the things it's taken it maybe a decade is one of the things I feel the proudest about is we met all our obligations. The cost of that event is up to 68 billion dollars in fines and penalties and class action lawsuits and we never considered once walking away from it or trying to firewall it off legally. So we met all those obligations and will continue to do that and I'm very proud of that. I think people of BP are as well, so it's taken a long time to get back that reputation, but that in the long term was absolutely the right thing to do.
I think our original communications of it probably we're not perfect and I think we lost some confidence in people around that, so it's changed the way we work and the industry now works with contractors and the industry worked together for response teams and I think people originally weren't so confident that BP should be even involved in some of those things, but we stayed with it and that was a good thing. I hope the whole industry has changed things. It's not unlike, you know, the events that happened in 1989 that led to having double wall tankers, for example, in the industry. I think the same sort of changes is going to come out of that
Jason Bordoff: You're referring to the Valdez?
Bob Dudley: Yes, that led to double wall, double-hulled tankers and same sort of things in drillings come out of this in the Gulf of Mexico.
Jason Bordoff: So you take the helm of BP in the wake of this and how close was BP to the brink to going under at that time?
Bob Dudley: Well, it's no secret, again, that we were asked and we concluded. We needed to cut the dividend to the company for zero; we had a very, very high dividend. To give you a sense of the importance of that dividend, at least in Britain, where about 40% of our shareholders were BP paid one out of every six pounds of dividends in the entire country or the same one out of every 6 dollars which is a remarkable impact on a country and as well as our many shareholders in the US, so that along with the debt and the rumors of bankruptcy began to circulate, what we quickly had to do was to sell assets quickly and also forward sale oil. So our CFO and Treasurer at the time worked 24 hours a day to ensure that we could shore up and get some confidence back in the financial markets, it would have been very easy for us to tip over at that time. I never thought that was going to happen, but you go back through the events in time is quite difficult.
In a big integrated oil and gas company selling of assets quickly requires breaking the emotional bonds with inside the company with all those assets. We had to quickly sell oil and gas fields and refineries, some that their fathers had built or they discovered themselves, but we as a management team sat down and said, this is it, we have to do it really fast and so our M&A teams, basically our internal M&A teams drove a process of divestments that you look back is 75 billion dollars, done very quickly and if we hadn't done that and we got too tied up with that, and not being fast, we would have certainly not made it through.
Jason Bordoff: And so you take over in the wake of that, what did you aim to achieve when you took over and when you look back now, how far do you think you've come in succeeding at those goals?
Bob Dudley: Well, we needed to change the way we managed the company, in a sense, it was operations all around the world. We created a different structure in the company where it was worldwide drilling projects, and management and moving of resources very quickly. So it's a very different structure put in place that allowed us and then we retooled all the assets, turned them around virtually almost all around the world to make sure that they were safe and then wanting to put in place a culture in the company that was not upstream or downstream and how we allocated capital and made decisions, so our management team that all work together, and we've been all together for pretty much for the entire decade. So it's a remarkable group of people that I've been working and privileged to work with over the last decade.
And then make sure that we shore up our relationships because when you have a crisis, it is interesting in two different ways, you find the people you're working with some people respond incredibly well in a crisis and get on with it and you never know how someone will respond. The second thing is your partnerships around the world. You have some partners, including banks that basically start pulling things away and then you have others that say you've been our partner for a long time, we want to work with you and help. So, we talk about it all the time, we don't do transactions, we do relationships. We're long term wavelength industry, as you know, Jason and so those relationships are something we do not take for granted, so we work hard at the relationship side and we are probably more flexible when our partners are having hard times to say we'll stay with you and that I think is so important in our industry.
And I think a company what we needed to do after something like that is rebuild the confidence of the employees in the company. I was really worried and there were people trying to hire away our talent. A headhunter friend of mine in Houston showed me the script that they were using to call people of BP saying, you know, there's another great job over here that BPs never gonna have any money to invest and don't you want to--it's time for you to come work for a winner and that's when it really alarmed and realized what could happen out from under through the fabric of a company's talent would just leave and lose the confidence, so getting that confidence back across the company inside as well as with our partners was something you intuitively just know you have to do.
Jason Bordoff: So I want to ask you about what's not on this timeline, which is where the energy industry is headed in the future and you've often talked about the dual challenge of meeting the world's rising demand for energy and also decarbonization to address the threat of climate change. You said something at ADIPEC in Abu Dhabi this year. On your panel, climate change is an existential threat. If we as leaders don't leave the companies, right, we could put ourselves out of business and other people will replace us. What's the role for an oil and gas company like BP in solving climate change?
Bob Dudley: Yeah, it was in response to, you know, my view the great dual challenges, though, as many as 2 billion more people on the planet in the twenties, forties than there are today, the energy needs will be up by a third which is about the equivalent of another United States and another China entering at the world stage in terms of energy demand and I find the debate on climate issue which is and it is also an existential issue, the rising climate conditions, you also have to take care of nations who will improve their prosperity and move people out of poverty and the debate becomes often polarized of Northern European view and West Coast US view as sort of extremes view of the world who are very privileged in this area and don't really understand when you travel to places across Africa and India, South Asia, all across it and we need to debate it and discuss and decide, make big decisions with both positions in mind.
It's very easy; it's very polarized issue, so I think as leaders, the existential thing, a little bit of what we learned back in the Beyond Petroleum days, if you go too fast and you don't get it right, you can drag yourself out of business. Say the Big Five Energy Companies that we all know, you know, the Exxon's, the Chevron's, the Shells, and Total's, and BP, just take those. We are only responsible for producing about 8% of the world's oil, so a lot of the focus is on course on these kinds of companies, because working through the corporate governance of it, but if we were all driven out of business, that oil will still be produced and it is National Oil Companies around the world and countries who will do that. So I see we're being used as leverage and we want to be leaders in this and we do enormous amount as companies, for example, through the Oil and Gas Climate Initiative, OGCI, to try to help develop technologies will change the world going forward, but we're not the epicenter of these issues.
Jason Bordoff: So what does that mean for the role of the industry, does that mean to lead in developing new technologies that when there's policy drivers are going to meet that. Does that mean advocating more strongly for policies that will cause that change to happen more quickly? There's a lot of oil and gas in the world and as you said, there's a lot of other producers out there, so what does that mean, the industry should be doing?
Bob Dudley: So I think the industry together, not just the companies I mentioned, but others as well, including National Oil Companies need to drive towards policies that can actually head towards solving the issue, the dual challenge about providing the energy and reducing emissions. One example is I cannot imagine how we're going to get there without a price on carbon, you know, that you and I've talked about it before, 200 years of economic history says unless something has a price, you can't change the behaviors around its use. So getting a carbon pricing system, not a global one, I don't think, some places would be taxation, you can't have a ultimately global trading system for carbon because as you get into the currency issues effectively, but we need to lead and work and help shape policy issues and we have to enable and work to develop the new technologies. We've got to be incredibly responsible at everything we do, methane for example, methane detection, monitoring, reducing, eliminating, flaring all those things. Natural gas has half the co2 of coal, for example and so
Jason Bordoff: When you control methane emissions?
Bob Dudley: Absolutely right, you've got to keep it in the pipes, and you got to burn it efficiently. I don't know how the world can get to the goals of Paris without a very major role for natural gas, renewable its 4% of today's primary energy production. We could carpet the world and we will not get there to be able to meet this goal, dual challenge. So you need natural gas in a big way to displace coal. No offense to the coal industry. I just can't figure out another way to do it. We need carbon capture, use and storage, you need the technology you also need the policy to help support that.
Jason Bordoff: Okay, can I ask you about that? Because you've often talked about the importance of a carbon price, BP has long advocated for carbon price and, you know, it won't surprise you that I hear sometimes people question that commitment and one example they point to is Washington State, and I just want to give you a chance to respond to it and what you hear is they supported in theory, but when it comes to supporting it in practice, BP put money to defeat the Washington State Carbon Tax Proposal, what's your response to that?
Bob Dudley: Well, you can call something a carbon tax, you can label it that, but if it's not really a carbon tax, and it's something else, I think we had an obligation step up against that effectively what we worked closely with the state of Washington to design a carbon tax, as it came forward as legislation at the end, they took the 10 largest producers of carbon of which three refineries were part of that. We have one of them, but they exempted 6 out of 10 local industries from being affected by the carbon tax. It also applied to only about 40% of the economy in Washington and then the funds generated from the tax were going to be put to a board a non-elected board for what to do and distribute that money. That was a political smash and grab and I've said that publicly, that doesn't make something a carbon tax, so we were deeply opposed to that. Others didn't step back and didn't say anything, but
Jason Bordoff: So in your view it wasn't economy wide, it wasn't technology neutral. I mean, there was a coal plant that was going to retire anyway and so things like that, I think were exempted, but you're saying I mean from your stand point it was too much.
Bob Dudley: Yeah, there were other industries as well. I think there was aluminum and there was power or paper plants or whatever it was clearly targeted. Didn't like that and to have an effective carbon price or tax, you've also got to have a plant what you do with the tax revenue, it cannot be it just goes into a General Fund, it has to have a purpose and of course there was such leakage in the state of Washington anyway, it probably would have driven industries out to nearby states and that's the thing about carbon tax. It has to have a coordinated, there's about eight principles, I won't go through them now, there's about eight things to me that are really important on pricing or carbon tax for them to be effective. One I'm really interested in, we support it's a fascinating idea that could be bipartisan in the US, you could have a carbon tax in the US for the use of energy, all kinds of energy, not just on producers, but people who flick the switch on the wall to use their power, and then put the revenues back in to a rebate to the citizens of the country and then you can do that in different ways, so the least advantage people may be able to get more of the
Jason Bordoff: Climate Leadership Council.
Bob Dudley: Yes, right, and I think that's got a lot of and it's big enough, it's nationwide. There is a lot of potential to do this. Another thing what China's doing setting up its own carbon markets, trading markets, which should come out in 2020, and we've been working with them for a number of years now, between the cities in the region, that's another thing that can make a big difference.
Jason Bordoff: You made a comment a minute ago, you said, you know, not just the producers, but the people who flip the switch and you were referring to, you know, all of us who consume energy, the cars, we drive, the power plants that companies build. So this came up at the Oil and Gas Climate Initiative meeting and I'm wanting to talk a little bit about that initiative, because that's been I know important to you, a coalition of 13-14 of the largest global companies in the industry, and scope three emissions came up at the meeting. The emissions from combustion of the product, not just from the way the industry operates and so some leaders in the industries say they're not to be blamed for the co2 emissions that come from the cars people buy and drive and Ford and others make or the power plants that people build and operate and others and some environmental activists say the oil industry is completely responsible for those, so talk a little bit about how you view the role of the industry in scope three emissions?
Bob Dudley: Well, scope three emissions to me it's a very, it's a muddled topic, because it's shorthand for things and then when you actually look into how the different companies do it in the calculations of the 11 different categories of it, everybody's got a different definition of scope three, so that is a problem. So I don't like talking about scope three, some say we should be responsible for limiting the amount of carbon footprints to scope three of our products. I've used the example of you take that extreme and you end up with somebody on the fourth quarter of your gasoline station and petrol station and we can say you with the SOU we won't sell you our product. You the family of four and a small car, well, you are the right carbon footprint and we'll sell it, so there's different ways of doing that. I think of companies being responsible in the amount of carbon you bring out of the ground as a good measure of the role of what we do, some companies count scope three, if you trade a cargo crew to somebody else, then you conclude that there's a lot of double and triple counting of scope, three emissions in the world, so I'm sort of regardless oh, I don't feel responsible. I think we cannot dictate to the public what they can and cannot do. We're going to be producing energy. If the market moves out of energy, and there's a high enough price on carbon with a limited amount of it, but we should not shut down what we're doing or sell our assets to somebody else and go all into renewables and think that's helping solve the problem.
Jason Bordoff: And just to be clear, the reason is because of what you said a minute ago, there's lots of other companies, lots of other producers, it will get produced somewhere if the demand is there, is that
I think that's right. I mean, governments need to step in, they can ban the internal combustion engine, those sorts of things absolutely, then the markets can respond and of course, we would respond to those kinds of things that creates other issues in companies, and countries and their economies, but we will look at all of our missions and our systems and our operations and refineries, how we do that? We will look at the carbon footprint or signature, I would say, of the carbon we produce, so, you know, we're moving, you know, heavy oil is a good example versus light oil. So, you know, our strategy is to move into advantage oils, effectively lowest cost, lowest carbon, kinds of energy going forward, move our investment profiles in the low carbon or no carbon energy as well and return to our shareholders, so all of this is a balance. So I meet with shareholders and they say, we would like you to move really quickly into renewables and I said, well, we can do that. Would you like us to cut the dividend? They're like, no, no, don't do that, so we've got to find the right balance and pace here. The world needs energy. I'm particularly disappointed the world has turned its back on nuclear energy. My father was a physicist. It has its safety problems, but we have really narrowed and made the box very small for us in society by walking away from nuclear, which would be so important in terms of reducing carbon emissions in the world system.
I do, a comment you made a minute ago. I do have, tell me if this is correct. I mean, there's clearly a huge amount of pressure on companies to show their long term investment plans are aligned with decarbonization targets that they're shifting more toward cleaner forms of energy, but it sounds like you're saying there's a risk that if you move too quickly in that direction, you actually get hurt in your share price? If you can't deliver the same returns today, is that correct?
Bob Dudley: That well today, that is right, some companies have done it. Orsted in Denmark has made that transition. We look at--we've been working in renewables for a long time and we're supportive of it. It does have a lower return profile? There's no question about it, so we've got to find the balance and then the goals of Paris, also as a dual challenge. It is reduce emissions and bring temperature down or reduce temperature rise, but also it talks about basically equity, eradicating poverty. So if you read the Paris goals are also dual challenges and a lot of people just pick the one side of it, so we've got a--there are many, many strategies to be consistent with Paris. It's not a straight line, my own views emissions will continue to rise here for a while, and then they will come down and probably temperature will rise faster, but the world must shift its policies to be able to reduce the emissions and governments also have to be behind it. Governments also have to deal with these huge financial challenges. I think in Europe today 240 billion dollars or euros is collected excise taxes from the sale of liquid fuels every day. So, governments also have to realize in the UK and 80 plus percent of the tax--petrol prices here are tax. As we move to electrification, government's gonna have to find a different way to bring those revenues and those have yet to be sorted out.
Jason Bordoff: Let me just ask, you mentioned when you got that what you said about it is lower returns today and so when we talk about the role of the Oil and Gas Industry in this transition, you hear skepticism from some people who just have trouble believing that the Oil and Gas Industry can truly be part of the solution because in that view, the major oil and gas companies have too much vested economic interest in the hydrocarbon economy that we have today and so people believe that they may say they supported, but may--can never really be fully so and they will try to slow that pace have changed, just respond to that, I'm sure you hear that all the time?
Bob Dudley: Well, I do and I think we must be part of the system because we're global and what reflects is short-term thinking. I would say that point of view is a short-term perspective that of course we can, but we sit down and think about 2050 today and our strategies are longer, what is the world going to be like? I believe it will have much lower carbon forms of energy; we want to be part of that. That's why we are investing a lot in in renewables, you know, we bought the largest solar development company in Europe, which was mainly in the UK and taking it to 11 countries around the world is an example, creating a big bio-energy company in Brazil. It's like many forms of businesses in the early days, even in technology, you don't necessarily make money, but you want to make sure that it's there and it will take over the others as they decline. If you go too fast, we've got to have the revenues coming in to be able to support, you know, the technology curves that will come and the other one, so it's a longer term perspective that is deeply part of all of I think, the major companies thinking. It is the development of the technology and seeding businesses to be ready to take on, but you have to do it, we in the Western world that rely on capital markets have to get this balance right.
Jason Bordoff: You mentioned a minute ago the role for gas in decarbonization, I just want to ask you that because that's a source of growing controversy, disagreement. We see cities around the world and certainly in the US kind of banning new connections to the gas system and as you said, the view in South Asia, Bangladesh or Pakistan probably looks different than it does in Berkeley, California or here in London, but people look at the carbon budget and say, you know, here's how much is left and there's only so much room for more emissions because once emissions are up there, they stay up there, so given that reality, what does that mean for you in the role of gas and deep decarbonization?
Bob Dudley: Well I think, so the role--if you are in a rich country or rich state, you can maybe afford to do that and I think that's fine and noble and good. You should combine that with technology that enables CCUS Carbon Capture and Storage, CCUS and storage, because that's to me is gotta be the way we get there as being able to actually capture the carbon not just not produce it, down the road I am very hopeful of hydrogen, so hydrogen, very clean burning, no carbon. If you think about what natural gas is, it's really one carbon atom and four hydrogen atoms. So natural gas itself again, prevent the leakage can be a great carrier of what will be Hydrogen, develop carbon capture, you can decarbonize the natural gas, and then burn the hydrogen and develop systems and infrastructure today that will take hydrogen down the road is another.
Jason Bordoff: So when you talk about the role of gas, you're talking about not just natural gas today, but in the future biogas, gas for CCUS, hydrogen, _____ [00:44:20] carbonizing gas.
Bob Dudley: Yes, absolutely.
Jason Bordoff: What do you think needs to be done to, I mean, even dialogue like this seems harder to have. What do you think needs to be done to improve trust between industries, government, activist groups?
Bob Dudley: Well, I've always, you know, you can't say oh, trust me; you actually just have to do things. I think it's a daily step by step, everything that you do needs to develop trust. It's like the crisis we had at the Gulf of Mexico; it took a long time for people to trust, I would say BP, so it's what you do not want to say. I think there's a political easiness about net zero and carbon is bad. That simplifies a problem that will work across all political parties. It's like nobody wants climate change and the companies don't want climate change and we want the solutions as well. This is polarization, which is happening and it's not just happening about climate change, it's happening about many things politically in the world that I worry about. I'm also an optimist, absolutely. This industry has taken on some of the greatest challenges and solves them over time. You've probably heard _____ [00:45:35] talk about the _____ [00:45:37] to kerosene that led to really the movement of lots of coal out of the industry, which has created some of the great prosperity in the world. This is where blaming the energy companies which created the great prosperity in the United States and Europe, other countries are quite so _____ [00:45:52] behind, but I am so optimistic about the technology.
Jason Bordoff: Has the role of technology changed in the industry over the course of your career?
Bob Dudley: Well it's changed enormously and by the way, technology has not yet been cracked, that will make the big movement on climate change yet. Renewables are fantastic. They are one way to do it, but we're going to come through with some solution, I hope the world will get back to some sort of nuclear capability that's much safer, for exampl, so you have to be optimistic about this, you have to be optimistic about hydrogen, you have to be optimistic about the capture of carbon, which is not yet economic, but these things I think will happen. So how has it changed since I began in 1979, which was some people look back and say that was the last great era of real political, geopolitical uncertainty, you know, the Iran-Iraq War, their oil embargo, all those times quite which made the energy industry really unpopular. My first day of work I went there were chants outside stop Big Oil in Chicago in 1979 had nothing to do with climate change, but it's always been, particularly United States and unpopular industry going back to 1911 and the breakups of the Standard Oil Trust, so it's a little bit in the DNA of US, but when you found natural gas when I started, it was the biggest disappointment. It would have been better to have had _____ [00:47:20].
Jason Bordoff: Yeah the industry was find gas once you're forgiven find it twice you're fired.
Bob Dudley: Yes, that's it, that's right. So gas didn't even seem to have a value. Now look at how its transformed things and natural gas, by the way, is part of the big reduction of emissions that have happened in the United States because gas has basically displace coal, so emissions in the US are down probably
Jason Bordoff: 12% to 13%, I think it's 2005.
Bob Dudley: Yes and here in the UK, emissions are down to Victorian Times, by the displacement of coal, so that's been one change. I think geopolitically has always been--it's always been a challenge in the industry. That's still here in the industry, as a young engineer in Texas, used to work in oil fields and there was always a thing on the logs, which is what says what the geology strata will be and there was always this thing that said, there's oil or gas, always in the top of wells and we all fell into the trap of perforating it, and there was nothing there and it was pre-fracking days, so the development of hydraulic fracturing is really, really tight rock has absolutely transformed the supply picture of the world in terms of energy which basically means there's more oil and gas and can ever be consumed out there.
Jason Bordoff: I mean, you made an interesting comment a minute ago, we don't have the technologies, we need yet to solve climate change, and I've heard you talk about what you think a decarbonized world looks like less oil, heat and power from renewables, and decarbonized gas, biofuels and hydrogen for hard to abate sectors, increased efficiency, more electrification. Why oil and gas companies are the right companies to deliver that future? I mean, Jeremy Grantham here in London calling for divestment from the industry, says these industries are going to gradually go away and other people will deliver those technologies. Why are these right companies to do it?
Bob Dudley: Well one we have people who are working on the technology understand the scale of the problem. There are things it could abate, climate change today if you carpeted the world of renewables fast enough, but you know, it's not as practical but there are great technologies out there that are helping. We work in these areas. We think long-term. We can attract capital and we can return it to investors. The big integrated companies are selling the fewest--just one of the few industries that can still work cross borders and a cross border solution is going to be what's required. We've reproduced natural gas. Azerbaijan, take it to Georgia across Turkey to Greece, to Albania, to Italy, for example. It's hard even for National Oil Companies to do that kind of project. What we're doing with our solar business is, we're taking that business around the world, because we are global. We take the solar business into our operations and then its _____ [00:50:14] in countries, for example, these are the kind of things that are actually not so easy to do by others, so you need scale and you need commitment and you need long-term thinking and that's what the big energy companies can do.
Jason Bordoff: I think in the US, there's a tradition where presidents leave a note on the desk in the Oval Office for their successor, so if you leave a note for Bernard Looney, what would it say? What's your advice to your successor in terms of where you see the industry going?
Bob Dudley: Well, it's not been a tradition of how we've studied at _____ [00:50:48] but I think it would come down to something I said earlier. We do relationships, not transactions, so we need to work and this is what company like we can do, is work around the world and always be conscious of that long-term. The second would be, just maintain the values. Values are really important. We have five simple values emphasize those values which are simply safety, excellence, respect, courage and one team as a way of working, and I think these things I don't need to write that letter because I think we think alike.
Jason Bordoff: Do you have
Bob Dudley: And Bernard will do a great job.
Jason Bordoff: Something you're most proud of and maybe a greatest regret when you look back on this remarkable 40-year career?
Bob Dudley: Well, I think I'm not a person who frets about regret for things. There's many things that might have done differently or the company might have done differently and they may have seemed like not the right things a year or two later, but five or six years later actually turned out to be the right thing. An example would be our investment in India, which originally was very troubled, is now I think going to be a big part of the company's future. I think one of the things that I look back on it for me, it might have been easy to turn my back on working with Russia, but knowing its importance and the relations and the patience and perseverance, it's a really good business for BP and it's a really strong relationship and I take some satisfaction in that looking back over really 15 years. And the other thing that I think I'm proud of what the company doing because size and scale matters in this industry and it always will in the energy industry, otherwise, you'll end up having short-term companies around that are just shifting assets around. I think has been the success of not only BP, Amoco, and Arco coming together, but also the industry itself, integrating itself and creating these new companies reinventing themselves with culture and those kinds of things are also part of the foundation being ready for this energy transition going forward.
Jason Bordoff: Right? I think I've already kept you longer than your schedule allowed, that even though there's still so much more to talk about and your remarkable career and where the energy industry is headed from here. Thank you, Bob Dudley, for being with us. Thanks to all of you for listening to this episode of Columbia Energy Exchange. For more information about the Center on Global Energy Policy, visit us online at energypolicy.columbia.edu or follow us on social media @ColumbiaUenergy. I'm Jason Bordoff, thanks for listening. We'll see you next week.