BSR Conference 2013

The Power of Networks

November 5-8 / San Francisco

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Leadership in Action: In Conversation with BP

Leadership in Action Session / November 6, 2013

Speakers

  • Dev Sanyal, Executive Vice President and Member of the Group Executive Committee, BP, PLC
  • Michael Oxman, Director, Advisory Services, BSR (Moderator)

Highlights

  • Energy is the glue that binds societies, and many people in developed countries take it for granted that their energy needs, from transportation to smartphones, will be met. The question posed by the idea of “peak oil” has not been resolved, but perhaps the more important consideration is “peak demand.”

  • Satisfying peak demand while working within environmental constraints will require a variety of energy sources, including oil, gas, and renewables. It will also require innovative approaches, technological shifts, and the creation of appropriate market structures, such as a putting a price on carbon.

  • BP has dealt with risks since its founding; the Macondo oil spill in the Gulf of Mexico has led it to reinforce its processes and staff capabilities and build resiliency into its processes to account for black swan events. It has also taken steps to share its experiences so that other companies can benefit from the lessons it has learned.

  • Fostering stakeholder engagement and creating a network of relationships are crucial to BP’s business success in both good times and bad. It also ensures that local communities realize the benefits of its operations.

Memorable Quotes

“How we work is as important as what we do, and this is why networks are so important to BP.” —Dev Sanyal, BP

“Resources exist below the ground, but our resources above the ground determine whether or not and how they are exploited.” —Dev Sanyal, BP

“Values provide a compass in good times, but are even more important in bad times.” —Dev Sanyal, BP

Overview

Sanyal began his presentation by focusing on the global energy situation and the need for a balanced approach when thinking about future energy scenarios. He noted that energy has played a crucial role in the economic and social development of societies around the world, and as a result, demand for energy will continue to rise in the coming decades. Although demand for energy in Organisation for Economic Co-operation and Development (OECD) countries has perhaps peaked, demand in the developing world, China, and India is likely to account for an increasing share of total energy consumption in the future. Connecting the supply and demand for energy is a massive undertaking and one that entails a high level of operational and commercial risk.

BP has been at the forefront of supplying both conventional and unconventional energy resources to the world, and it will remain an integral part of the global energy system far into the future. Sanyal made the point that the next revolution in energy will most likely have multiple aspects. Among the most important will be whether or not the shale oil and gas development in the United States can be exported to other countries, the nature of technological shifts in the transportation sector, and the success or lack thereof of efforts to implement carbon storage. Also critical in this regard will be actions by business and the general public to use energy more efficiently; in fact, Sanyal argued that energy efficiency may be one of the most important revolutions to occur in the energy sector.

In response to a question from Oxman about what’s needed to address climate change, Sanyal pointed out that the nature of the energy supplied must reflect the realities of the natural environment, economics, and politics, and for these reasons, it will undoubtedly shift over time. But it’s not realistic to think of different energy sources as mutually exclusive. For decades to come, the energy mix will likely include a combination of oil, gas, coal, nuclear, and renewables. The exact combination will be determined by, among other things, the extent to which innovations in energy supply and demand bear fruit, and the contours of public policy (such as the implementation of a carbon tax). Regardless of the source of energy, however, producing it entails the assumption of major risks, the management of which requires significant resources.

Oxman noted the challenges that BP has faced in recent years, particularly the Macondo oil spill in the Gulf of Mexico, and he asked about the impact of the spill on BP. Sanyal responded that the tragedy’s internal impact was beyond what anyone can imagine and that it led to significant shifts in BP’s approach to risk management. Among the changes has been a strengthening of its internal processes and dedication to safety, improvements to its staff training to enhance their capabilities, and the development of deeper and more extensive relationships with stakeholders. Sanyal explained that stakeholder relations should not be undervalued, particularly local communities to whom energy companies need to provide tangible value.


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