No other oil company has had to fight for its existence like BP has in the last three years. Following the 2010 Gulf of Mexico oil spill, the oil giant has pushed through major reforms. BP has completed payments into a $20 billion disaster trust fund and streamlined its business to focus on higher-margin activities. How does Dev Sanyal, BP’s Executive Vice President and Group Chief of Staff, view developments in the global market, and how is BP responding?
We have seen some extraordinary changes in world energy markets in the recent past – in supply, technology and demand. In 2012, the US recorded the highest growth in oil production with the onset of production from shales, and that’s a trend that is here to stay.
As well as seeing new sources of growth on the supply side, we are also seeing demand continue to shift towards emerging markets and non-OECD countries. Two decades ago, demand from these countries stood at 42 percent; today it is 56 percent and that upwards trend will continue to 2030, according to our estimates.
However, while new sources and new levels of demand are very much a new reality for the Oil & Gas market, there are some constants. Russia remains incredibly important in terms of its prospects, and the Middle East is still a very important part of the world in the oil market, in particular because of the role of OPEC.
The industry is facing some important questions in the face of these new realities. With the shale gas revolution in the US, for example, will we see the US exporting those supplies and, if so, in what kind of quantities? And what role will technology play when it comes to unleashing potential?
In terms of how BP views this new world order, I believe we have to look at exploration and production and the consumer, or downstream, sides quite distinctly from each other.
As far as supply is concerned, we go where the resources are, but also where there is a set of fiscal conditions that make it attractive to do business; that will be an important factor in the decision-making process.
As far as downstream activities are concerned, we are responding to increased demand in markets like India and China. If you look at our relationship with Reliance Industries in India, for instance, what we are doing is developing India’s indigenous gas production, which ultimately will be consumed by a country with extraordinary energy poverty. So we are linking our supply-side activity with high-potential consumer markets.
With these shifts in demand and supply comes evolution on the company side. And the whole industry is facing up to this evolution. In the late ‘90s, BP made the first move in terms of the creation of the supermajors, with our merger with Amoco and acquisition of Castrol: we changed and the industry followed. That resulted in the creation of very large enterprises.
I believe we are reaching the next stage in this corporate evolution, whereby companies will look to become more focused. The key measure for the industry will be around quality. BP has actually made that step to make quality its mantra. We will focus on areas where we can drive value.
Technology is going to be an important differentiator and that area is a very important part of what we bring to the table. The reality is that countries and their oil sectors have access to capital markets and to service companies.
So what they need from us is a unique technology or a unique proposition. Within BP, for instance, we’ve invested in our supercomputing facility in Houston – the largest of its kind. That’s going to be a very important part of our offering.
So the business paradigm for BP is evolving and BP is responding. I believe that component parts of the model will be oriented towards focus, discipline and choice, which is very different from the model that we used to have as an industry – one that drove growth through volume.
Profile: Dev Sanyal, Executive Vice President and Group Chief of Staff, BP Plc. Dev Sanyal is a member of BP’s Group Executive Committee and is the accountable executive the or all of BP’s corporate activities in strategy and long-term planning, risk, economics, competitor intelligence, government and political affairs, policy and group integration and governance.
He joined BP in 1989 and has held a variety of international roles in London, Athens, Istanbul, Vienna and Dubai.