A Mixed Legacy

Major oil companies are rarely home to "celebrity CEOs." BP's John Browne was the exception, and it's ironic that his departure--already in the works after a couple of years of bad results on safety--was hastened by the intense media scrutiny that celebrity status now attracts. Most of the articles about Lord Browne that I've read in the last several days have focused on two areas in which his decisions as CEO of BP put a lasting imprint on the oil and gas industry and the world beyond it: industry consolidation and climate change. I can't resist a few thoughts on both topics, which have had a significant impact on my own career.

Although not everyone sees the outcome as a good thing, Lord Browne generally gets credit for starting the wave of oil industry consolidation that began in the late 1990s. The timeline of major mergers supports this notion, with BP having announced its acquisition of Amoco in August 1998, a year before Exxon and Mobil agreed to merge. BP's acquisition of ARCO followed in 2000, creating the present company. Meanwhile, France's Total acquired first Petrofina of Belgium in 1999 and then Elf Acquitaine in 2000. 2001 saw the last changes on this scale, when Chevron merged with Texaco and Conoco with Phillips. Lord Browne's role fits neatly into a "great man" view of this history. However, for those who see leaders arising in response to events, we can't forget the pressures created by the collapse of oil prices in the late 1990s, following the Asian Economic Crisis. Shrinking oil company cash flows set the stage for consolidation, as did the realignment of the US downstream market, when Shell and Texaco joint-ventured their refining and marketing operations early in 1998.

The value of these mergers remains debatable, as does their "industrial logic." While the merged companies are clearly stronger financially, how much of that is attributable to the transactions, and how much to global market conditions beyond their control? Are the merged entities replacing more of their reserves than their predecessors could have, independently? We will never know, though Mobil, Texaco and Amoco were certainly large enough on their own to have continued participating in world-scale projects, while the productivity of tens of thousands of employees lost to "synergies" might have been helpful to an industry struggling to keep pace with the growth of energy demand. And while I don't subscribe to the idea that these mergers reduced competition by enough to harm consumers, the retail market concentration in many regions is at levels that would have been unthinkable in the 1980s. All in all, the legacy of these mergers is a mixed bag, and I don't just say that because one of them effectively ended my 22-year career at Texaco.

In contrast, I regard Lord Browne's impact on matters such as climate change and alternative energy as generally positive. He was a pioneer in recognizing the importance of these challenges and speaking out about them. Mark Moody-Stuart of Shell may have been saying many of the same things in the late '90s, but for those of us working in US major oil companies, it was different hearing it from BP, which had an operating philosophy closer to ours. Without John Browne's high profile on such issues, it would have been harder for others to break out of the pack. And while BP has not always lived up to the expectations set by its aspiration to move "Beyond Petroleum", we can't discount the subtle effect of that subversive little tagline.

It's too early to say how much Browne's legacy will be tainted by the safety problems that surfaced late in his tenure. They serve as an important reminder to leaders in any organization that big strategies are not sufficient for lasting success, without an equal attention to the details of their consequences. As John Browne departs, no one can say he was cautious or run-of-the-mill. I suspect it will be some time before we see another oil company CEO in his mold.