Good morning everyone and thank you for inviting me to be your guest today. I am veryhonoured by your invitation.
I appreciate how much collective experience is represented in this room – experience of the UK, of the US, and of the partnership between our two countries.
It is a partnership I know well. Like many of you, I have spent more time than I care to remember on airplanes from Heathrow to Dulles or Aberdeen to O’Hare.
I started work in the late ‘70s for an American company, Amoco, with a desire to see the world, and very soon I was posted to Scotland. In those days, the North Sea was the new pioneering frontier for the offshore industry and it was very exciting for a young engineer.
BP and other operators were building big platforms – they were drilling in deeper water and tougher weather conditions than anywhere else in the world. A lot of us cut our teeth on those early deepwater projects. They provided invaluable training for what was to come later in places like the Gulf of Mexico, Angola, the South China Sea and Brazil.
My wife and I also went back to the US in the late 1980′s with a special souvenir: our son was born in Scotland. We have great memories of that time.
It was a time when BP was also active in both the UK and the US, with a growing operation at North America’s biggest oil discovery in Prudhoe Bay, Alaska as well as the North Sea.
BP then became even more of an Atlantic partnership by acquiring Sohio and Britoil and then merging with Amoco and Arco in the late 1990s
As a result, today BP actually has more production and more people in the US than the UK.
We have roughly 20,000 people in the States and around 16,000 here. We directly support 1/4 of a millions jobs in the US today. BP was the largest foreign investor in the US during the 2011-12 period, aside from the spending related to the accident in 2010.
But both countries are major centres of operations for us
In the UK, our North Sea business is not simply surviving but in the middle of a £10 billion investment programme with our partners. We also have our network of service stations - where I am sure all of you get your petrol and diesel - as
However, today’s BP is much more than the ‘two-pipeline company’ that it was often described as years ago. Much of our production comes from other places – from Angola, from Azerbaijan, from Trinidad & Tobago, from Egypt, Iraq and Indonesia
US AND UK – TWO THRIVING ENERGY PARTNERS
But to start our conversation, I’d like to focus on our two countries – the UK and US
What has really worked well over the years? What have we learned? How can we build a future where energy has the three key attributes that people want, and these are:
- i. It is sufficient and affordable – we have enough of it
- ii. It is secure – we can count on it
- iii. And it is sustainable – it doesn’t have unacceptable impacts.
And we can learn from both the UK and US experiences here.
In the UK, the North Sea is enjoying a new lease of life as oil and gas start to flow from a series of recent investments.
Meanwhile, in the US, the surge in production of oil and gas has been phenomenal - as
In 2012, the US had the largest oil and natural gas production increase in the world. And in fact, the US Department of Energy announced this month that it expects the US will soon surpass Russia as the world’s leading producer of oil & natural gas.
What a difference from 40 Octobers ago, when Americans were sitting in lines at filling stations and the talk was of a permanent energy shortage?
This has reverberations beyond the world of energy. The shale phenomenon has revived the US economy. It’s created thousands of jobs and it’s improved the country’s competitiveness.
Also we should not overlook the fact that America’s carbon emissions are also now much lower, and back down to 1993 levels, partly as a result of gas displacing coal in power stations, as well as the great strides that have been made in energy efficiency.
In Europe, by contrast, we have seen the reverse effect. Gas supplies have not been unlocked. Gas prices have exceeded those of coal and Europe has been importing America’s surplus coal to burn for power.
I think there is a powerful lesson here that the best way to control carbon is to establish a carbon price and thereby bring market forces to bear on the issue.
Before I look at the reasons for what has happened in the US – and the UK – let me just say something briefly about the state of energy globally.
At the macro level, our industry is seeking to meet global demand for energy that is currently expected to grow by at least a third by 2030.
And almost all of that increase is expected to occur in the non-OECD world – the emerging economies, notably China and India.
Can we meet that demand? We certainly can.
Our estimates show that the world has at least 50 years’ worth of booked oil and gas reserves at current production levels. And we can be confident there are a lot of unbooked reserves out there too – with many of the shale deposits not yet recorded for example.
Some of you will have been familiar with the theory of so-called ‘peak oil’. Well, we believe that theory has itself now peaked. In short, demand is strong and supply is plentiful.
However the simple co-existence of rising demand and the resources to provide supply is not in itself any guarantee that the two will converge and deliver the energy that the world needs.
As well as having the right resources below the ground, we also need to have the right conditions above the ground.
What do we mean by that? First it requires that governments over many years – and often over different political cycles - provide
And second it requires that we do our part as businesses by making the right decisions in our investments – by choosing the right projects to pursue.
Today we face a world full of opportunities
That’s why in BP for example we have set out a very clear plan that involves a series of very large, high value, high quality projects – around 15 of them over the three-year period ending next year.
Beyond 2014 we want to repeat the pattern – with a further series of carefully selected projects that provide energy for our customers and growing value for our shareholders.
So we are in a situation when another kind of partnership is absolutely critical – and that is the partnership between government and industry.
Where governments allow the right conditions to exist, we can get to work to fulfil our part of the bargain. And I count agencies of government and their judiciaries. We of course are struggling with this today in the US.
Putting our issue aside for a moment, the US over many years has provided an environment that is conducive to investment – in oil and gas, allowing land owners to own mineral rights, providing stable fiscal frameworks and supporting R&D in concert with industry.
This led to a transformation in the Gulf of Mexico around the turn of the century. We had the incentive to develop new seismic technologies, which opened vast oil and gas fields lying below the salt canopies that had previously obscured them.
The same conditions then led to this century’s shale revolution – although it had roots going back many decades. Many people may think frac
cing is a new technology, but in fact it was invented by Amoco in 1947. And later it became the focus of some big joint industry-government R&D programmes in the 1970s.
In the UK, too, the story of the North Sea has been a story of a partnership between government and industry – an industry that now generates almost £40 billion for the economy every year. The industry is responsible for 450,000 jobs – equivalent to more than three British armies. It’s one of the world’s great industrial success stories - but a largely unsung one.
This partnership has involved a lot of discussion at times about the right fiscal framework.
Oil and gas extraction has provided the British Exchequer with more than £300 billion in production tax over the past 45 years – so it’s a valuable source of revenue for the country.
The challenge is to devise a stable long-term framework that provides the right contribution to public services at the same time as encouraging investment.
Getting that balance right often requires some detailed conversations and that is what happened last year. Industry and government talked the issue through and this led to some very focused measures such as the new allowances that were created to encourage investment in mature fields. Since this was brought in, more than £3 billion of capital has been allocated to some of the oldest fields on the UK continental shelf.
Production in the North Sea has been declining – as you probably know. It’s now around 1.4 million barrels a day. But the good news is that it’s likely to rise again from 2015 and could approach two million barrels by 2017.
So the simple message I want to leave with you is that the energy sector can thrive - to
With that as a background principle, let me conclude with a little more detail on the US. I am sure you will have followed recent developments in the media and I’d like to give you some furthercontext as we see it in BP.
Our approach in the US is the same as it is worldwide – we play to our distinctive strengths. And these include exploration, giant fields, deepwater, gas value chains, and building world-class downstream businesses.
Our US footprint is smaller and more focused than it was three years ago. We divested our refineries in Texas and California, along with their associated businesses. We also sold non-strategic assets in the Gulf of Mexico, as well as onshore. Altogether we have sold $19 billion of assets in the US over the last two years.
These divestments don’t mean we have lost interest in the US. Quite the opposite -
In addition to our modernization of Whiting and our work in reviving the Gulf of Mexico, we recently announced both a billion-dollar investment in Alaska and the siting with our partners of a new Alaskan terminal for the export of liquefied natural gas.
None of this should be surprising. We have roots in the US that go back to the 1860s and we are now the largest energy investor in the US - $55 billion over the past five years.
Indeed, the Progressive Policy Institute recently issued a report naming us an “Investment Hero”
- - the
In addition to our 20,000 employees, our business activities support approximately 260,000 US jobs – equivalent to a city roughly the size of Aberdeen.
We spent $26.3 billion last year with 16,420 US businesses located in all 50 states. And we spent $31.7 million nationwide supporting local community projects. We are also an official partner of the US Olympic Committee and Team USA.
So our commitment to the US clearly runs deep. But unfortunately, as you know, we continue to face challenges related to the Deepwater Horizon accident in 2010.
The accident was a terrible tragedy. And among the various parties involved, we alone stepped up from the outset. We acknowledged our role and committed to help make things right.
And after three and half years, following the expenditure of more than $26 billion on the response, as well as the clean-up and the payment of claims, and nearly 70 million personnel hours spent on response-related efforts, we are glad to say that we are seeing tremendous progress across the region.
The latest data we have on fishing and tourism is very encouraging. Many tourism records broken in 2011 were surpassed again in 2012, with local officials saying that new records are possible in 2013.
Recreational fishing – which is an important source of tourism and a significant contributor to the Gulf economy
We have learned from the accident and shared its lessons, with industry, government and regulators around the world. We have a specialist safety and operational risk team embedded within our businesses. We have re-structured our business in ways that are designed to further drive
Clearly, we have not shirked or walked away from the commitments we made in 2010 – commitments that exceeded our legal obligations.
In fact, I believe no company anywhere has done more, faster, to meet its commitments to economic and environmental restoration efforts in the wake of an industrial accident.
Despite these extraordinary efforts, our actions have gone unrecognized in many quarters.
We remain suspended and debarred by the US Environmental Protection Agency from entering into new federal contracts.
While we continue to work with the EPA to resolve the matter through an administrative agreement, we have also exercised our right to challenge the EPA’s action by filing a complaint in federal court.
We are also in the middle of challenging an interpretation to the settlement agreement that we signed with private plaintiffs last year. The agreement was intended to compensate the vast majority of remaining individuals and businesses with legitimate claims relating to the spill. And we have committed to meet all legitimate claims.
However, based on a misinterpretation by the Claims Administrator of that settlement’s claims programme, businesses with inflated losses or with no actual losses at all were systematically receiving payments.
For example, a rice mill in Louisiana - 40 miles from the coast - earned
We are pleased that two weeks ago, the federalAppeals court known as the ‘Fifth Circuit’ issued a ruling rejecting that misinterpretation.
It ordered the District Court in New Orleans to determine the proper interpretation of the settlement in further proceedings and meanwhile to stop all payments to those claimants who have no – and I quote - “actual injury traceable to the Deepwater Horizon accident” - unquote.
Separately, in July the District Court appointed aformer FBI Director and Federal Judge to investigate allegations of misconduct within the settlement claims facility. Initial reports found evidence of misconduct and outright fraud by senior executives in the facility.
In response, the District Court expanded the former FBI Director’s powers and we believe that his continued investigation is essential to assuring the integrity of the claims process.
The legal system should be about justice, not profit for plaintiffs’ attorneys. My humble advice would be to keep the business model of plaintiffs’ attorneys out of the UK.
Throughout this process we have sought to do the right thing. And in our view doing the right thing requires speaking up and taking legal action when we think the wrong things have been happening. We have no quarrel with the American people and we remain committed to the Gulf.
I fervently hope that we will be able to resolve these issues and continue playing a leading role in America’s energy industry as we have for around 150 years.
Indeed, in both the US and the UK, we hope that the future will be one of truly constructive relationships that will benefit our countries, our companies and our citizens
The Economic Relationship between the US and the UK
The Chancellor of the Exchequer, Rt Hon. George Osborne, spoke at an Atlantic Partnership event on Wednesday 10th July on the subject of the economic relationship between the US and the UK – a relationship in which the US is the largest foreign investor in the UK, and the UK the largest investor in the US.
Here are some of the issues he addressed:
Transatlantic Trade Investment Partnership
The Chancellor discussed the importance of the Transatlantic Trade Investment Partnership (TTIP) Despite reservations within the EU and amongst protectionist in Congress, there is political will for the implementation of TTIP as evidenced by the recent talks between President Obama and Prime Minister Cameron on the subject at the G8 in Northern Ireland. However, Mr. Osborne warned that the implementation of TTIP was not inevitable. There was still much to be acheived surrounding the inclusion of Financial Services in TTIP and the regulation of compensation.
US & UK Fiscal and Monetary Policies
Mr. Osborne discussed the economic similarities between the US and the UK. Both countries enjoy comparable levels of public debt, unemployment and size of deficit. Fiscal consolidation in the US over this period has been 1.8% of GDP in comparison to 1.1% of GDP in the UK.
The Chancellor stated that both the UK & US have adopted a tight fiscal policy whilst adopting loose and creative monetary polices.
He said that the US had dealt more decisively with the banking problem than the UK back in 2008/9. Immediately following the crash, the US aggressively recapitalized their banks.
In the UK, the workforce participation rate has increased. There has been an acceptance and willingness by the British workforce to accept pay freezes in return for continuous employment. This had resulted in less unemployment rates than in previous recessions.
Sir Peter Westmacott, KCMG LVO, British Ambassador to the United States, was AP’s special guest at a well-attended luncheon discussion on “US Foreign Policy: Does Europe Matter Anymore?”
Ambassador Thomas Mayr-Harting, EU Head of Delegation to the United Nations, was AP’s special guest at a well-attended luncheon discussion on “The EU and Current Challenges in the Middle East.”
Celeste Wallander, Deputy Assistant Secretary of Defense for Russia/Ukraine/Eurasia, United States Department of Defense, was AP’s special guest at a well-attended dinner discussion on “The NATO Summit in Chicago – The Way Ahead in NATO-Russia Relations.”
Lord Stephen Green, UK Minister of Trade and Investment, was AP’s special guest at a well-attended luncheon discussion on the UK’s model for sustainable economic growth.
General Sir David Richards, Chief of the Defence Staff of the United Kingdom, was AP’s special guest for a luncheon discussion on Libya: Lessons for Successful Intervention. Guests enjoyed a well attended lunch hosted by the British Consul General with a lively discussion about Libya and other UN sanctioned intervention and lessons for the future.