tag:theconversation.com,2011:/au/topics/bp-5621/articlesBP – The Conversation2023-07-28T12:20:50Ztag:theconversation.com,2011:article/2104322023-07-28T12:20:50Z2023-07-28T12:20:50ZWhy Dunkin’ and Lego rebrands succeeded – but X missed the mark<figure><img src="https://images.theconversation.com/files/539836/original/file-20230727-78107-9s5n36.jpg?ixlib=rb-1.1.0&rect=177%2C0%2C1833%2C1315&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">So far, Twitter's rebrand = X + why?</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/longexposure-shot-shows-both-old-and-new-version-of-twitter-news-photo/1553537563?adppopup=true">Lorenzo Di Cola/NurPhoto via Getty Images</a></span></figcaption></figure><p>Twitter has swapped the <a href="https://apnews.com/article/twitter-x-logo-blue-bird-musk-0689e9a5c3a217afc2fbefeaf0e6d8a8">fluffy bird that used to symbolize the social media platform</a> for a spindly black X. Ditching the company’s well-known logo and changing its name to a letter often <a href="https://symbolsage.com/x-symbol-meaning-symbolism/">associated with danger, death and the unknown</a> is only the <a href="https://www.cnn.com/2022/12/18/tech/twitter-ban-social-media-links">latest user-aggravating</a> step <a href="https://www.theverge.com/2022/10/30/23431931/twitter-paid-verification-elon-musk-blue-monthly-subscription">CEO Elon Musk has taken</a> since he bought Twitter in <a href="https://apnews.com/article/elon-musk-twitter-deal-live-updates-78d68790fb0b9971d6e65b76d97e3670z">October 2022 for US$44 billion</a>.</p>
<p>But it’s the most visually jarring one.</p>
<p>The <a href="https://www.wsj.com/articles/elon-musks-pivot-to-x-draws-strong-opinions-across-twitter-5bc80833">reaction has mainly been a mix of ambivalence</a>, <a href="https://www.newsweek.com/elon-musks-twitter-x-logo-plan-met-ridicule-jokes-1814750">ridicule</a> and <a href="https://www.cnn.com/2023/07/24/media/twitter-x-reliable-sources/index.html">scorn</a>. For the most part, longtime Twitter users are unhappy at what they perceived as another unnecessary change that’s eroding their enthusiasm for the social media platform. It’s hard to find anybody praising the change so far, except perhaps some of <a href="https://www.facebook.com/elonmuskfanpage/">Elon Musk’s most devoted fans</a>. Twitter co-founder <a href="https://twitter.com/jack/status/1683327575517728769">Jack Dorsey signaled</a> that he was finding the uproar overblown.</p>
<p>I’m paying close attention to this corporate pivot because I’m a scholar of <a href="https://scholar.google.com/citations?user=cXqXHpsAAAAJ&hl=en">design who researches social media and brand campaigns</a>. <a href="https://www.thebrandingjournal.com/2015/10/what-is-branding-definition/">Logos and brand names</a> change all the time and rarely cause this much commotion. But because these changes go deeper than most, I believe the risks of damage to the company are greater.</p>
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<h2>X’s clumsy design</h2>
<p>X might strike you as a weird brand name, and the change may seem to have happened out of the blue, but Musk has long been smitten with the letter.</p>
<p>In 2000, the founders of PayPal <a href="https://www.washingtonpost.com/history/2023/07/25/elon-musk-paypal-twitter-x-rebrand/">ousted him as CEO for trying to change its name</a> to “X,” his Tesla models are <a href="https://www.ndtv.com/world-news/as-twitter-is-named-x-a-look-at-elon-musks-s3xy-naming-strategy-for-cars-4238936">famously named</a> S, 3, X and Y – which displayed together basically spell out the word “SEXY,” and one of <a href="https://www.yahoo.com/entertainment/elon-musk-changed-son-name-204701460.html">his many children is named X on his birth certificate</a>.</p>
<p>I would describe the new logo, <a href="https://www.theguardian.com/technology/2023/jul/24/elon-musk-reveals-the-new-twitter-logo-x">submitted by a Twitter user</a>, as a white-on-black, sans-serif X consisting of two strokes. It’s minimal and modern – and a stark departure from Twitter’s iconic blue-and-white bird. That shade of blue makes you feel <a href="https://www.verywellmind.com/the-color-psychology-of-blue-2795815">calm and serene</a>; black <a href="https://www.oberlo.com/blog/color-psychology-color-meanings">conveys sophistication and mystery</a>.</p>
<p>And yet even people who know nothing about design are <a href="https://twitter.com/elonmuskewl/status/1683121154188247046">poking fun at the logo’s simplicity</a> and <a href="https://twitter.com/PopCrave/status/1683551440416165889">unprofessional execution</a>. To me, the logo looks suitable for a metaverse strip club or a dating app for robots. </p>
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<h2>Facebook’s Meta journey</h2>
<p>Oddball branding is hardly unusual for a big tech company.</p>
<p>When Facebook rebranded itself as Meta in 2021, it was part of a comprehensive, strategic and <a href="https://logo.com/blog/facebooks-new-logo">long-term plan</a>. The transformation signified the company’s aspiration to shift from a social media platform to an enterprise <a href="https://theconversation.com/what-is-the-metaverse-2-media-and-information-experts-explain-165731">focused on the metaverse</a>.</p>
<p>While the goal of a vibrant metaverse <a href="https://blockchainmagazine.net/why-is-metaverse-failing-the-top-10-reasons-for-metaverse-fail/">remains more theoretical than imminent</a>, the rebranding still gave Meta some momentum as it now seeks to <a href="https://qz.com/meta-layoffs-2023-jobs-metaverse-ai-1850196575">shift its focus to artificial intelligence</a>. </p>
<p>Meta’s rebranding highlights the importance of staying relevant and embracing innovation. The company discerned the changing landscape and demonstrated a willingness to adapt in response to shifting consumer needs and preferences. When it realized the metaverse wasn’t materializing, the company focused elsewhere.</p>
<p>Perhaps that openness to trying new things explains why the <a href="https://www.quiverquant.com/threadstracker/">rollout of Threads</a>, Meta’s new competitor for the social media platform formerly known as Twitter, <a href="https://www.forbes.com/sites/rogerdooley/2023/07/05/will-threads-be-a-twitter-killer/">is apparently off to a strong start</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/539648/original/file-20230726-15-7heuat.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A metal t and a metal w are piled up on the ground." src="https://images.theconversation.com/files/539648/original/file-20230726-15-7heuat.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/539648/original/file-20230726-15-7heuat.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/539648/original/file-20230726-15-7heuat.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/539648/original/file-20230726-15-7heuat.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/539648/original/file-20230726-15-7heuat.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/539648/original/file-20230726-15-7heuat.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/539648/original/file-20230726-15-7heuat.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A pile of characters removed from a sign on the Twitter headquarters building seen in San Francisco on July 24, 2023.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/TwitterLogo/5a220a8384234fbb86f34740ca413538/photo?Query=twitter&mediaType=photo,video,graphic,audio&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=6881&currentItemNo=6">AP Photo/Godofredo A. Vásquez</a></span>
</figcaption>
</figure>
<h2>From dunking to Dunkin’ and rebuilding Lego’s brand</h2>
<p>When Dunkin’ Donuts trimmed its name to Dunkin’ in 2018, the <a href="https://jkrglobal.com/case-studies/dunkin/">reception was mostly positive</a>. Its customers seemed to get that the company wanted to move away from being closely associated with donuts – a high-calorie pastry with little nutritional value – and toward becoming a “<a href="https://news.dunkindonuts.com/news/releases-20180925">beverage-led, on-the-go brand</a>.”</p>
<p><a href="https://brandsonify.com/case-studies/dunkins-2018-19-rebrand/">That rebrand succeeded</a>, and the company has also stuck with the slogan it adopted a dozen years earlier: “<a href="https://sites.psu.edu/kristenchomosrcl/2019/09/12/america-runs-on-dunkin">America runs on Dunkin’</a>.” </p>
<p><a href="https://www.linkedin.com/pulse/lego-engineered-remarkable-turnaround-its-business-howd-lindstrom/">Lego had another rebranding effort</a> that <a href="https://www.theguardian.com/lifeandstyle/2017/jun/04/how-lego-clicked-the-super-brand-that-reinvented-itself">business school students learn about as a model</a>.</p>
<p>Lego was profitable, popular and beloved for the entire 20th century, but <a href="https://www.lego.com/cdn/cs/aboutus/assets/blte6c97bc4718a1848/Annual_Report_2003_ENG.pdf">around 2003 its sales began to wane</a>. Presumably, kids had too many other toys and digital devices to play with and simply didn’t have the time or patience to assemble small, colorful, plastic blocks anymore.</p>
<p>Undeterred, Lego conducted <a href="https://www.fastcompany.com/3040223/when-it-clicks-it-clicks">extensive market, ethnographic and psychological research</a> to better understand how people in general, and children in particular, play with its wares. The company’s management realized that Lego products can be tied to just about anything.</p>
<p>Lego blocks are used both in original ways – kids make their own creations – and derivative ways, whether it’s recreating a pirate ship or a dinosaur seen in a beloved movie. </p>
<p>So the company began to partner with “Star Wars,” Nintendo, “Jurassic Park” and other brands to market special Lego sets. It also released a movie in 2014 that <a href="https://www.the-numbers.com/movie/LEGO-Movie-The#tab=summary">grossed nearly $500 million</a> – <a href="https://www.bbc.com/news/business-29063790">boosting Lego sales and profits</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/539799/original/file-20230727-15-il508q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="The orange Dunkin' logo see on a big brown building." src="https://images.theconversation.com/files/539799/original/file-20230727-15-il508q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/539799/original/file-20230727-15-il508q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=363&fit=crop&dpr=1 600w, https://images.theconversation.com/files/539799/original/file-20230727-15-il508q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=363&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/539799/original/file-20230727-15-il508q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=363&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/539799/original/file-20230727-15-il508q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=457&fit=crop&dpr=1 754w, https://images.theconversation.com/files/539799/original/file-20230727-15-il508q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=457&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/539799/original/file-20230727-15-il508q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=457&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The Dunkin’ brand name and logo no longer includes the word ‘donuts.’</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/the-corporate-logo-for-dunkin-replacing-the-former-name-of-news-photo/1195087289?adppopup=true">Gary Hershorn/Getty Images</a></span>
</figcaption>
</figure>
<h2>BP rebrand crashed and burned; American Airlines had low altitude</h2>
<p>Many corporate rebrands either don’t work or don’t do much to help their companies.</p>
<p>In 2000, BP changed its branding <a href="https://www.smsusyd.com/post/bp-rebranding-in-2000-marketing-campaign-fails-2#">from British Petroleum to Beyond Petroleum</a>.</p>
<p>Despite efforts to reposition itself as an environmentally responsible company, its actions revealed a contradictory truth. While BP reportedly invested <a href="https://www.theguardian.com/business/2000/jul/25/bp">over $100 million in the rebranding effort</a>, it continued to spend billions more on oil exploration than renewable energy initiatives. BP abandoned the campaign a few years after its massive <a href="https://www.mmc.gov/priority-topics/offshore-energy-development-and-marine-mammals/gulf-of-mexico-deepwater-horizon-oil-spill-and-marine-mammals/">2010 oil spill in the Gulf of Mexico</a>. </p>
<p>After <a href="https://simpleflying.com/american-airlines-us-airways-merger/">merging with US Airways</a> <a href="https://1000logos.net/american-airlines-logo/">in 2013</a>, American Airlines rebranded away from its iconic 1968 logo, which had blue and red letters and an eagle between them symbolizing American power and ingenuity, to a sleek red-and-blue stripe with an abstract eagle beak separating the company’s colors.</p>
<p>The company called the new logo a “<a href="https://www.dezeen.com/2013/01/21/american-airlines-debuts-new-logo-and-livery/">flight symbol</a>.” Some design experts <a href="https://www.businessinsider.com/the-new-american-airlines-logo-is-a-travesty-2014-1">dubbed it a travesty</a>.</p>
<p>Despite the contention, the company <a href="https://urbanjungle.ca/2013/02/american-airlines-what-you-can-learn-from-a-failing-attempt-to-rebrand/">retained the new look</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/539807/original/file-20230727-24380-h4r1mh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="An airplane emblazoned with the old American Airlines branding at an airport." src="https://images.theconversation.com/files/539807/original/file-20230727-24380-h4r1mh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/539807/original/file-20230727-24380-h4r1mh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=391&fit=crop&dpr=1 600w, https://images.theconversation.com/files/539807/original/file-20230727-24380-h4r1mh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=391&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/539807/original/file-20230727-24380-h4r1mh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=391&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/539807/original/file-20230727-24380-h4r1mh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=492&fit=crop&dpr=1 754w, https://images.theconversation.com/files/539807/original/file-20230727-24380-h4r1mh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=492&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/539807/original/file-20230727-24380-h4r1mh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=492&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">American Airlines adopted a logo in the late 1960s that endured for decades.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/MiamiAirportTravel/073efb53e9d94d1a8aec20677f11f0fa/photo?Query=american%20airlines%20jet&mediaType=photo,video,graphic,audio&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=369&currentItemNo=213">AP Photo/Lynne Sladky</a></span>
</figcaption>
</figure>
<h2>Ultimate fate of X</h2>
<p>I doubt the X rebrand will succeed – and not just because I dislike the new name and logo.</p>
<p>There are some <a href="https://www.cbsnews.com/news/twitter-trademark-x-com-rebrand/">challenging legal issues</a> with naming a major company a letter of the alphabet. The letter X’s use as a brand is already <a href="https://www.thedailybeast.com/elon-musks-twitter-rebrand-as-x-gets-site-blocked-under-indonesia-porn-laws">banned in certain countries</a> because of its prevalence in pornography branding. </p>
<p>And the <a href="https://mashable.com/article/twitter-rebrand-x-brand-identity-crisis-website">rollout has been messy on the company’s own website</a>. Musk reportedly <a href="https://mashable.com/article/elon-musk-twitter-take-x-handle-from-original-user">swiped the @x handle from its original user</a> without offering any compensation. </p>
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<p>What’s more, many users had already left the platform because of <a href="https://www.theguardian.com/technology/2022/dec/13/twitter-lose-users-elon-musk-takeover-hate-speech">technical glitches and increased hate speech</a>; the switch to X could make them less likely to come back and won’t make others more eager to stick around.</p>
<p>In Musk’s quest to create what he says will become an app that “<a href="https://www.cnbc.com/2023/07/24/elon-musk-risks-more-damage-to-twitter-business-after-name-change-to-x.html">does everything</a>,” I believe that his X rebrand took Twitter one more step toward being good for hardly anything.</p><img src="https://counter.theconversation.com/content/210432/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Matthew Pittman does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A scholar of design who researches brand campaigns critiques the social media platform’s new look.Matthew Pittman, Assistant Professor of Advertising and Public Relations, University of TennesseeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1945592022-11-14T17:31:12Z2022-11-14T17:31:12ZWhy COP27 should be the last of these pointless corporate love-ins<p>It’s a glorious afternoon at a luxury resort in Egypt, with six swimming pools leading to a lovely little stretch of beach on the Red Sea. A salsa aquatic class in one of the pools has several enthusiastic participants. Elsewhere, guests are lounging on deck chairs sipping ice cold cocktails. Cheerful waiters are refilling glasses and serving snacks. </p>
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<p><em>You can listen to more articles from The Conversation, narrated by Noa, <a href="https://theconversation.com/us/topics/audio-narrated-99682">here</a>.</em></p>
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<p>Welcome to Sharm el-Sheikh, Egypt’s popular resort and host to the 27th meeting of the Conference of the Parties of the United Nations Framework Convention on Climate Change, or COP27. Or, as some critics would put it, the <a href="https://www.cadtm.org/Glasgow-s-Conference-of-the-Polluters-again-confirms-that-global-arson-needs">Conference of the Polluters</a>. </p>
<p>My first impression on arriving was that I had entered a gigantic theme park. The roads leading to the resorts were lined with brilliantly lit palm trees in green and yellow, and lamp posts draped in dazzling coloured lights. The night sky was criss-crossed with bright searchlights from the venue to draw attention to the climate emergency facing humanity. </p>
<p>This is my fourth COP, and I don’t intend to come again. Given how little these conferences have achieved since they began in 1995 – not to mention their gigantic carbon footprints – I am convinced it’s time for them to stop. </p>
<p>After 27 years of negotiations, conflicts and breakdowns, the world’s nations have basically agreed: (1) climate change is a serious problem; (2) something must be done to fix it; (3) rich nations should do more; and (4) based on the <a href="https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement">Paris agreement of 2015</a>, every country should set their own emissions goals and do their best to meet them. </p>
<p><a href="https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement#:%7E:text=The%20Paris%20Agreement%20is%20a,compared%20to%20pre%2Dindustrial%20levels.">The UN claims</a> that the Paris agreement is “legally binding”, but there are no enforcement mechanisms or penalties for countries in breach. Even current pledges <a href="https://news.un.org/en/story/2022/10/1129912">will not be enough</a> to meet the target to restrict global warming to the 1.5°C target agreed in Paris.</p>
<h2>How COP works</h2>
<p>There are three worlds that inhabit COP meetings but carefully evade each other. Official country delegates attend meetings and draft policies. Then there are the corporates and industry associations, who are by far the <a href="https://journals.sagepub.com/doi/abs/10.1177/0170840612464609">most significant and powerful</a> presence here. </p>
<p><a href="https://www.bbc.com/news/science-environment-63571610">Over 600</a> fossil-fuel industry lobbyists are attending. This is more than the combined delegations from the ten most climate-impacted countries, and the second largest delegation after the United Arab Emirates, itself a petroleum power. Among those 600 lobbyists, some have even been invited as part of 30 country delegations. </p>
<p>The third group at COP consists of civil society organisations from a wide range of countries, but dominated by non-governmental organisations (NGOs) from developed countries. Growing numbers of NGOs representing the interests of business and industry (BINGOs) occupy the civil society space in COP meetings to promote particular resource and energy use agendas. Funders include major oil corporations like Shell and Exxon, nuclear giants like Areva, and big miners like Rio Tinto and BHP. </p>
<p>Business and civil society delegates both participate in climate negotiations and host side events showcasing their climate actions. These can seem to take place in parallel realities. Directly after one session organised by international NGO Global Witness about the killings and disappearances of protesters against mining projects in Africa, Asia and Latin America was a session on “mining governance for a just energy transition”. </p>
<p>In this latter session participants from the Democratic Republic of Congo government and the <a href="https://www.icmm.com/en-gb/our-story/who-we-are">International Council for Mining and Metals</a> described inequalities, environmental impacts, tax avoidance and corruption as challenges facing mining in Africa. There was no mention of the violence and killings documented in the same region in the previous session. </p>
<h2>The police presence</h2>
<p>These opposing narratives are a feature of COP, but only become visible during protest marches. Notably, however, COP27 is the first to be held in a “<a href="https://www.theguardian.com/environment/2022/oct/18/greenwashing-police-state-egypt-cop27-masquerade-naomi-klein-climate-crisis">police state</a>”. Before getting to the venue, I spent a few days in Cairo at a hotel near Tahrir Square, home of the 2011 revolution. The square had heavily armed police in armoured vehicles at every corner. I photographed the obelisk in the square with an armoured police vehicle in the foreground and was immediately reprimanded by an angry soldier. </p>
<p>There are remarkably <a href="https://www.theguardian.com/environment/2022/nov/12/cop27-first-week-roundup-powerful-dispatches-muted-protest-little-cash">few police</a> at the venue in Sharm el-Sheikh, however. This is because of the <a href="https://www.hrw.org/news/2022/11/06/egypt-arrests-curbs-protests-cop27-nears">extraordinary lengths</a> taken by the organisers to prevent protests. </p>
<p>This has included pre-emptive arrests of local activists, a complicated registration process restricting the wider public to a “green zone”, and unprecedented surveillance including police-monitored cameras in all Sharm el-Sheikh taxis. There is also a “designated area” for protesters away from the venue to avoid the kind of mass protests that have hampered previous COP meetings. </p>
<p>Staging COP in a luxury resort has also priced out activists. Hotel rates average US$250 to US$300 (£213 to £255) a night and there are no “budget” options. A sandwich at the venue cost US$15, though this was halved after complaints. There are also no streets where people can gather, just roads linking the various resorts. </p>
<p>So while over <a href="https://www.theguardian.com/environment/2021/nov/11/cop26-police-tactics-creating-atmosphere-of-fear-protesters-say">100,000 people marched</a> the streets of Glasgow at COP26, and previous COPs like <a href="https://www.theguardian.com/environment/2009/dec/12/hundreds-arrested-copenhagen-protest-rally">Copenhagen</a>, <a href="https://mg.co.za/article/2011-12-04-cop17-protesters-to-lay-charges-after-march-attack/">Durban</a> and <a href="https://www.bbc.co.uk/news/av/world-europe-34959192">Paris</a> also saw clashes between protesters and police, dissent is effectively neutralised here. <a href="https://www.commondreams.org/news/2022/11/12/not-yet-defeated-1000-march-climate-justice-cop27">Over 1,000 protesters</a> marched inside the venue on November 12, and I couldn’t even find them. </p>
<h2>COP and petroleum</h2>
<p>So what else has changed since I first came to a COP in Durban in 2011? Notably, the marketing of both corporates and NGOs is much slicker. And corporates have become much smarter – I can’t see a BP or Shell or Exxon-Mobil logo anywhere. The corporatisation of COP is complete when BP’s chief executive and four other senior employees are in the <a href="https://www.bbc.com/news/science-environment-63584993">official delegation of Mauritania</a>, a country where BP has major investments. </p>
<p>To further consolidate the power of the fossil fuel industry, COP27 has a “Middle East Green Initiative” led by Saudi Arabia with the inevitable net zero pledge by 2050. Saudi also has one of the largest booths inside the conference venue. And it is no accident that the next COP will be hosted by the United Arab Emirates. </p>
<p>In 27 years of COP meetings there has not been a single call to phase out fossil fuels. The only reference was the <a href="https://www.un.org/en/climatechange/cop26">agreement at COP26</a> which called for “the phasedown of
unabated coal power and phase-out of inefficient fossil fuel subsidies”. </p>
<p>Meanwhile, a <a href="https://www.theguardian.com/environment/2022/nov/11/gas-producers-using-cop27-to-rebrand-gas-as-transitional-fuel-experts-warn?CMP=share_btn_tw">massive rebranding exercise</a> is underway at COP27 where natural gas is being positioned not as a fossil fuel but as a “transition fuel”. Once this reframing is complete, the major fossil fuel players will corner all subsidies for natural gas.</p>
<h2>COP’s great failure</h2>
<p><a href="https://www.statista.com/statistics/276629/global-co2-emissions/">In 1995</a>, when COP1 was convened in Berlin, global carbon emissions were 23.45 billion metric tons. By 2021 they were 36.4 billion metric tons. Emissions have increased every year with two exceptions: the 2007-09 financial crisis and during COVID-19. In both cases this was because of economic contraction, not efforts to tackle climate change. </p>
<p>No one at COP will speak of this particular elephant in the room: that it <a href="https://journals.sagepub.com/doi/10.1177/1350508420973629">may well be impossible</a> to decouple economic growth from carbon emissions. Emissions rebounded on both occasions and are expected to reach their <a href="https://www.sciencealert.com/co2-is-on-track-to-hit-a-record-high-in-2022-and-shows-no-signs-of-going-down">highest recorded level</a> in 2022. </p>
<p>Let’s look at three other quantifiable COP measures: climate finance, which is seen as key to helping poor countries <a href="https://unfccc.int/topics/climate-finance/the-big-picture/introduction-to-climate-finance/introduction-to-climate-finance">to reduce emissions</a>; <a href="https://unfccc.int/topics/adaptation-and-resilience/workstreams/approaches-to-address-loss-and-damage-associated-with-climate-change-impacts-in-developing-countries">climate reparations</a> from rich to poor countries for damage caused by <a href="https://theconversation.com/cop27-how-responsible-are-industrialised-countries-for-climate-change-193965">historical carbon emissions</a>; and the success of technologies to mitigate emissions, particularly carbon capture and storage. </p>
<p>On climate finance, wealthier nations committed at Copenhagen 2009 to mobilise <a href="https://unfccc.int/topics/climate-finance/the-big-picture/climate-finance-in-the-negotiations">US$100 billion per year</a> for <a href="https://unfccc.int/topics/climate-finance/the-big-picture/introduction-to-climate-finance/introduction-to-climate-finance">poorer countries</a>. However, they have <a href="https://www.oecd.org/climate-change/finance-usd-100-billion-goal/">never achieved</a> this goal. </p>
<p>Meanwhile, the 60 largest banks in the world <a href="https://www.cnbc.com/2021/03/24/how-much-the-largest-banks-have-invested-in-fossil-fuel-report.html">have invested US$3.8 trillion</a> in fossil fuels since the Paris agreement. In December 2019 investors paid nearly US$26 billion for Saudi state oil company Aramco’s initial public offering. Of course, both fossil fuel companies and banks involved have pledged fictional net zero commitments for 2050. </p>
<p><a href="https://theconversation.com/its-the-big-issue-of-cop27-climate-summit-poor-nations-face-a-1trillion-loss-and-damage-bill-but-rich-nations-wont-pay-up-194043">Climate reparations</a> are on the official agenda at COP27 for the first time, which is certainly a <a href="https://theconversation.com/cop27-three-reasons-rich-countries-can-no-longer-ignore-calls-to-pay-developing-world-for-climate-havoc-193873">step forward</a>. It’s hard to be optimistic, however. The US will vigorously challenge creating any loss and damage fund for poor countries, as it has <a href="https://www.scientificamerican.com/article/fearing-liability-u-s-resists-u-n-fund-for-climate-damages/">consistently done</a> at past COPs. </p>
<p>As for carbon capture, it <a href="https://reneweconomy.com.au/new-global-ccs-report-shows-up-silliness-of-clean-coal-predictions-in-news-corp-81413/">only stored 0.02%</a> of fossil-fuel CO₂ in 2021. That makes a mockery of this cornerstone of climate change mitigation. </p>
<h2>Alternatives</h2>
<p>COP represents a gathering of elites. A <a href="https://www.annualreviews.org/doi/full/10.1146/annurev-environ-012220-011104">recent study</a> found that this was a major obstacle to climate mitigation. Excluded are the poor, disenfranchised, and those who bear the brunt of climate impacts but contributed least to the problem (and will bear the impact of rich nations’ energy transitions because the necessary minerals and metals will be extracted from their lands). Increasingly dissent is <a href="https://www.wsws.org/en/articles/2013/05/14/pers-m14.html">becoming criminalised</a>, not only in “police states” but in <a href="https://www.theguardian.com/politics/2022/oct/24/keir-starmer-backs-stiff-sentences-for-climate-protesters-who-block-roads">western liberal democracies too</a>. </p>
<p>It is time to end this spectacle of private jets flying in dignitaries and delegates to discuss the climate emergency. Genuine civil society organisations should boycott future COPs and focus on direct action at national and local levels. They need to make their governments accountable for emissions targets, and target fossil fuel corporations and the banks that finance them. </p>
<p>There is no accountability in COP, only a diffusion of (ir)responsibility that legitimises corporate power. COP27 will go the way of previous COPs: empty promises, stirring speeches and slick corporate campaigns. And higher carbon emissions next year.</p>
<p>So let COP become another Davos, a conference of and for the rich. There are plenty of luxury seaside and ski resorts in countries eager to host the next few COPs. Just don’t go there.</p><img src="https://counter.theconversation.com/content/194559/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bobby Banerjee has received funding in the past from the Australian Research Council. He is attending COP27 as a delegate for Western Sydney University, Australia, which is his former employer and still retains him as an adjunct professor. </span></em></p>A look back at what the COPs have actually achieved.Bobby Banerjee, Professor of Management, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1886402022-08-16T15:00:24Z2022-08-16T15:00:24ZInfluential oil company scenarios for combating climate change don’t actually meet the Paris Agreement goals, our new analysis shows<figure><img src="https://images.theconversation.com/files/479255/original/file-20220816-20495-lz4b8o.jpg?ixlib=rb-1.1.0&rect=67%2C116%2C2928%2C1877&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">BP, Shell and Equinor all produce widely used scenarios of energy's future.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/s-huge-oil-refinery-complex-continues-its-24-hour-news-photo/52204994">Christopher Furlong/Getty Images</a></span></figcaption></figure><p>Several major oil companies, including BP and Shell, periodically publish scenarios forecasting the future of the energy sector. In recent years, they have added visions for how climate change might be addressed, including scenarios that they claim are consistent with the international Paris climate agreement.</p>
<p>These scenarios are hugely influential. They are used by companies making investment decisions and, importantly, by policymakers as a basis for their decisions.</p>
<p>But <a href="https://www.carbonbrief.org/analysis-shell-says-new-brazil-sized-forest-would-be-needed-to-meet-1-5c-climate-goal/">are they really compatible</a> with the Paris Agreement?</p>
<p>Many of the future scenarios show continued reliance on fossil fuels. But data gaps and a lack of transparency can make it difficult to compare them with independent scientific assessments, such as the global reviews <a href="https://www.ipcc.ch/report/sixth-assessment-report-working-group-3/">by the Intergovernmental Panel on Climate Change</a>.</p>
<p>In a <a href="https://www.nature.com/articles/s41467-022-31734-1">study</a> published Aug. 16, 2022, in Nature Communications, our international team analyzed four of these scenarios and two others by the International Energy Agency using a new method we developed for comparing such energy scenarios head-to-head. We determined that five of them – including frequently cited scenarios from <a href="https://www.bp.com/en/global/corporate/energy-economics/energy-outlook/overview.html">BP</a>, <a href="https://www.shell.com/energy-and-innovation/the-energy-future/scenarios.html">Shell</a> and <a href="https://www.equinor.com/sustainability/energy-perspectives">Equinor</a> – were not consistent with the Paris goals.</p>
<h2>What the Paris Agreement expects</h2>
<p>The <a href="https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement">2015 Paris Agreement</a>, signed by nearly all countries, sets out <a href="https://www.carbonbrief.org/guest-post-why-1-5c-and-well-below-2c-are-part-and-parcel-of-one-temperature-goal/">a few criteria</a> to meet its objectives.</p>
<p>One is to ensure the global average temperature increase stays well below 2 degrees Celsius (3.6 F) compared to pre-industrial era levels, and to pursue efforts to keep warming under 1.5°C (2.7 F). The agreement also states that global emissions should peak as soon as possible and reach at least <a href="https://www.un.org/en/climatechange/net-zero-coalition">net zero</a> greenhouse gas emissions in the second half of the century. Pathways that meet these objectives show that carbon dioxide emissions should fall even faster, reaching net zero by about 2050. </p>
<p>Scientific evidence shows that overshooting 1.5°C of warming, even temporarily, would have harmful <a href="https://climateanalytics.org/publications/2021/the-science-of-temperature-overshoots-impacts-uncertainties-and-implications-for-near-term-emissions-reductions/">consequences for the global climate</a>. Those consequences are not necessarily reversible, and it’s unclear how well people, ecosystems and economies would <a href="https://theconversation.com/transformational-change-is-coming-to-how-people-live-on-earth-un-climate-adaptation-report-warns-which-path-will-humanity-choose-177604">be able to adapt</a>.</p>
<h2>How the scenarios perform</h2>
<p>We have been working with the nonprofit science and policy research institute <a href="https://climateanalytics.org/">Climate Analytics</a> to better understand the implications of the Paris Agreement for <a href="http://1p5ndc-pathways.climateanalytics.org/">global and national</a> decarbonization pathways – the paths countries can take to cut their greenhouse gas emissions. In particular, we have explored the roles that <a href="https://climateanalytics.org/briefings/coal-phase-out/">coal</a> and <a href="https://climateanalytics.org/latest/report-why-gas-is-the-new-coal/">natural gas</a> can play as the world transitions away from fossil fuels.</p>
<p>When we analyzed the energy companies’ decarbonization scenarios, we found that <a href="https://www.bp.com/en/global/corporate/energy-economics/energy-outlook/overview.html">BP</a>’s, <a href="https://www.shell.com/energy-and-innovation/the-energy-future/scenarios.html">Shell</a>’s and <a href="https://www.equinor.com/sustainability/energy-perspectives">Equinor</a>’s scenarios overshoot the 1.5°C limit of the Paris Agreement by a significant margin, with only <a href="https://www.bp.com/en/global/corporate/energy-economics/energy-outlook/overview.html">BP</a>’s having a greater than 50% chance of subsequently drawing temperatures down to 1.5°C by 2100. </p>
<p>These scenarios also showed higher near-term use of coal and long-term use of gas for electricity production than Paris-compatible scenarios, such as those assessed by the IPCC. Overall, the energy company scenarios also feature higher levels of carbon dioxide emissions than Paris-compatible scenarios. </p>
<p>Of the six scenarios, we determined that only the International Energy Agency’s <a href="https://www.iea.org/reports/net-zero-by-2050">Net Zero by 2050</a> scenario sketches out an energy future that is compatible with the 1.5°C Paris Agreement goal.</p>
<p>We found this scenario has a greater than 33% chance of keeping warming from ever exceeding 1.5°C, a 50% chance of having temperatures 1.5°C warmer or less in 2100, and a nearly 90% chance of keeping warming always below 2°C. This is in line with the criteria we use to assess <a href="https://www.carbonbrief.org/guest-post-why-1-5c-and-well-below-2c-are-part-and-parcel-of-one-temperature-goal/">Paris Agreement consistency</a>, and also in line with the approach taken in the IPCC’s <a href="https://www.ipcc.ch/sr15/chapter/spm/">Special Report on 1.5°C</a>, which highlights pathways with no or limited overshoot to be 1.5°C compatible.</p>
<p><iframe id="YRlxE" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/YRlxE/9/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>Getting the right picture of decarbonization</h2>
<p>When any group publishes future energy scenarios, it’s useful to have a transparent way to make an apples-to-apples comparison and evaluate the temperature implications. Most of the corporate scenarios, with the exception of Shell’s Sky 1.5 scenario, don’t extend beyond midcentury and focus on carbon dioxide without assessing other greenhouse gases. </p>
<p>Our method uses a transparent procedure to extend each pathway to 2100 and estimate emissions of other gases, which allows us to calculate the temperature outcomes of these scenarios using <a href="https://www.carbonbrief.org/guest-post-the-role-emulator-models-play-in-climate-change-projections/">simple climate models</a>.</p>
<p>Without a consistent basis for comparison, there is a risk that policymakers and businesses will have an inaccurate picture about the pathways available for decarbonizing economies.</p>
<p>Meeting the 1.5°C goal will be challenging. The planet has already warmed about <a href="https://earthobservatory.nasa.gov/world-of-change/global-temperatures">1.1°C since pre-industrial times</a>, and people are suffering through deadly heat waves, droughts, wildfires and extreme storms linked to climate change. There is little room for false starts and dead-ends as countries transform their energy, agricultural and industrial systems on the way to net-zero greenhouse gas emissions.</p><img src="https://counter.theconversation.com/content/188640/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Robert Brecha is affiliated with Climate Analytics in Berlin, Germany. </span></em></p><p class="fine-print"><em><span>Gaurav Ganti is affiliated with Climate Analytics in Berlin, Germany.</span></em></p>Most claiming to be compatible with the climate agreement show a strong continuing reliance on natural gas and coal.Robert Brecha, Professor of Sustainability, University of DaytonGaurav Ganti, Ph.D. Student in Geography, Humboldt University of BerlinLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1762702022-03-10T11:14:01Z2022-03-10T11:14:01ZWhy big firms are rarely toppled by corporate scandals – new research<figure><img src="https://images.theconversation.com/files/450729/original/file-20220308-23-ibsoam.jpg?ixlib=rb-1.1.0&rect=53%2C29%2C3940%2C2634&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/modern-corporate-buildings-skyscrapers-city-london-1599442681">Shutterstock/Donatas Dabravolskas</a></span></figcaption></figure><p>Everyone makes mistakes. And that includes the world’s biggest companies, which are reliably prone to gaffes, errors of judgment and wrongdoing. </p>
<p>Some of these moments could even be labelled as corporate scandals – the kind of incident which shoves firms into the spotlight and places their activities under detailed public scrutiny. </p>
<p>But do these events do lasting damage? Does an oil spill, fraudulent activity or other unethical behaviour really affect highly valued reputations, sales and market value?</p>
<p>Our research suggests not. In fact, <a href="https://onlinelibrary.wiley.com/doi/10.1111/1467-8551.12365">our analysis</a> of the effects of a wide variety of business scandals shows that only rarely is the effect as severe as we might imagine. </p>
<p>Instead, it seems the public has a strong tendency to forget and move on. And even initial unplanned (and at the time unwanted) attention can lead to greater brand awareness, proving the old adage that any publicity is good publicity.</p>
<p>Take the recent <a href="https://news.sky.com/story/joe-rogan-and-spotify-who-is-the-us-podcaster-and-what-is-the-covid-misinformation-row-all-about-12529388">furore over Spotify</a>. In early 2022, the world’s largest music streaming service was accused by science and health professionals of offering a platform for misinformation about COVID.</p>
<p>So what happened next? At first, there was a dip in the stock market price <a href="https://www.businessinsider.com/spotifys-shares-dropped-by-12-after-neil-young-pulls-music-2022-1?r=US&IR=T">of about 12% </a> when artists including Neil Young, Joni Mitchell and Graham Nash announced they were withdrawing their music from the service. This financial hiccup was followed by an immediate <a href="https://theweek.com/coronavirus/1009616/spotify-stock-rebounds-after-joe-rogan-apology">stock price rebound </a> that is likely to climb beyond pre-scandal levels. Spotify went on to <a href="https://www.independent.co.uk/news/world/americas/spotify-joe-rogan-podcast-covid-label-misinformation-b2003821.html">add disclaimers</a> to its COVID-related content and removed some content. </p>
<p>So in the long term, this will probably turn out to be nothing more than a slight bump in the road for Spotify. As a business, it provides a hugely popular service and boasts 172 million premium subscribers around the world, 28 million of whom joined in 2020. How many of them will cancel their subscriptions and forgo access to their carefully curated playlists because Young and Mitchell have decided to walk?</p>
<p>And while it is true that the company’s business model relies on musicians and other content providers, the reality is that most artists cannot afford to not be on the platform. Giving Spotify the benefit of the doubt, it’s entirely possible it made an honest mistake and underestimated how sensitive some people have become to discussions about the pandemic. Customers will probably make peace with this. </p>
<p>Likewise, Netflix will doubtlessly survive recent controversies over some of its content, such as the British comedian <a href="https://www.theguardian.com/culture/2022/feb/04/jimmy-carr-condemned-for-joke-about-gypsies-in-netflix-special">Jimmy Carr’s comments</a> about the Holocaust. With so many subscribers around the world attracted by the service’s wide range of content, Netflix is another example of an industry giant that can shrug things off. </p>
<p>And remember <a href="https://www.cbsnews.com/news/facebook-stock-price-recovers-all-134-billion-lost-in-after-cambridge-analytica-datascandal/">Facebook’s market collapse</a> after it was linked to the personal data of millions of users being collected by the political consulting firm Cambridge Analytica? Don’t feel bad if you don’t, it lasted about seven seconds (OK, maybe seven days). The company then recovered <a href="https://www.cbsnews.com/news/facebook-stock-price-recovers-all-134-billion-lost-in-after-cambridge-analytica-datascandal/">all of the US$134 billion</a> (£102 billion) it had previously lost in market value.</p>
<h2>Law and disorder</h2>
<p>So what makes some scandals stick? In our research, we found that only certain scandals tend to have significant negative effects on corporate reputations and performance. One apparently vital element is a company being found liable in a court of law. The legal process gives weight and depth to a scandal that might otherwise have quickly disappeared.</p>
<p>The <a href="https://www.bbc.co.uk/news/business-34324772">Volkswagen emissions scandal</a> for example, started in 2015. Seven years later, the company is still negotiating settlements in class action lawsuits brought against it for cheating on emissions tests. </p>
<figure class="align-center ">
<img alt="The Royal Courts of Justice in London." src="https://images.theconversation.com/files/450756/original/file-20220308-27-19gyrvm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/450756/original/file-20220308-27-19gyrvm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=407&fit=crop&dpr=1 600w, https://images.theconversation.com/files/450756/original/file-20220308-27-19gyrvm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=407&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/450756/original/file-20220308-27-19gyrvm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=407&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/450756/original/file-20220308-27-19gyrvm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=512&fit=crop&dpr=1 754w, https://images.theconversation.com/files/450756/original/file-20220308-27-19gyrvm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=512&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/450756/original/file-20220308-27-19gyrvm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=512&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">It’s the court that counts.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/royal-courts-justice-london-136279025">Shutterstock/chrisdorney</a></span>
</figcaption>
</figure>
<p>The company’s share price dropped 30% immediately <a href="https://money.cnn.com/2015/09/24/investing/volkswagen-vw-emissions-scandal-stock/">after the scandal</a> (it has improved since the move towards electric vehicles) and Volkswagen’s reputation is still tarnished by the event, as it continues to attract significant regulatory scrutiny, affecting its <a href="https://www.morningstar.co.uk/uk/news/216954/stock-of-the-week-volkswagen.aspx">status among investors</a>. </p>
<p>Similarly, years after being found responsible for the <a href="https://www.epa.gov/enforcement/deepwater-horizon-bp-gulf-mexico-oil-spill">Deepwater Horizon disaster</a> in the Gulf of Mexico in 2010, BP is still paying the price of its negligence, as it continues to be embroiled in <a href="https://www.reuters.com/legal/transactional/5th-circuit-revives-bps-fight-over-deepwater-cleanup-workers-claims-2022-01-20/">many lawsuits</a>. And following regulatory intervention, German financial services provider Wirecard is not even around anymore to tell the story of how €1.9 billion (£1.6 billion) <a href="https://www.cnbc.com/2020/06/29/enron-of-germany-wirecard-scandal-casts-a-shadow-on-governance.html">disappeared from its balance sheet</a>. </p>
<p>Yet without corporate culpability determined by the court of law, very few accusations stick, even in the face of media scrutiny. Without clear evidence of harm caused to a group of people, there is very little in the way of measurable negative impact, or demand for compensation for the damage caused. </p>
<p>As consumers, we often like to signal moral superiority and enjoy some of the drama provided by the corporate discomfort of a juicy scandal. But our research found that people’s response to a company is driven by more mundane considerations. These are price, convenience, loyalty, ease of use and habit – and there aren’t many scandals considered quite scandalous enough to make us change any of those.</p><img src="https://counter.theconversation.com/content/176270/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Irina Surdu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The mud rarely sticks.Irina Surdu, Associate Professor of International Business Strategy, Warwick Business School, University of WarwickLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1782692022-03-03T13:26:16Z2022-03-03T13:26:16ZShell, BP and ExxonMobil have done business in Russia for decades – here’s why they’re leaving now<figure><img src="https://images.theconversation.com/files/449591/original/file-20220302-17-234t11.jpg?ixlib=rb-1.1.0&rect=7%2C0%2C4941%2C3294&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Pumps at a Shell fueling station in Tatarstan, Russia, Nov. 20, 2017.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/pump-nozzles-at-a-shell-petrol-station-in-kazan-tatarstan-news-photo/876639322">Yegor Aleyev\TASS via Getty Images</a></span></figcaption></figure><p>In response to Russia’s invasion of Ukraine, British energy giant BP announced on Feb. 27, 2022, that it will <a href="https://www.washingtonpost.com/business/2022/02/27/bp-russia-rosneft-ukraine/">sell its nearly 20% ownership in Russian state-owned energy giant Rosneft</a>. BP’s rival Shell is also <a href="https://www.reuters.com/business/energy/shell-exit-russia-operations-after-ukraine-invasion-2022-02-28/">pulling out of all of its operations in Russia</a>, as are U.S. energy giant <a href="https://www.ft.com/content/76db0e18-7c7e-4b96-9ee5-81dcfca18f34">ExxonMobil</a> and Norway’s state-controlled company, <a href="https://www.equinor.com/en/news/20220227-equinor-start-exiting-joint-ventures-russia.html">Equinor</a>.</p>
<p>These breakups will not be cheap. BP’s stake in Rosneft is <a href="https://www.washingtonpost.com/business/2022/02/27/bp-russia-rosneft-ukraine/">worth US$14 billion</a>. In various projects, Shell has about <a href="https://www.forbes.com/sites/jonathanponciano/2022/02/28/shell-joins-bp-abandons-3-billion-russia-investments-after-senseless-ukraine-invasion/?sh=3f7769636a44">$3 billion in assets in Russia</a>. ExxonMobil has over <a href="https://www.wsj.com/articles/exxon-to-shut-down-oil-production-in-russia-after-ukraine-attack-11646180028">1,000 employees</a> and more than <a href="https://www.reuters.com/business/energy/exxon-mobil-begins-removing-us-employees-its-russian-oil-gas-operations-2022-03-01/">$4 billion in assets</a> there. Pulling out will inflict significant financial hits on all of these companies.</p>
<p>Western energy companies have invested and operated in Russia for a long time – <a href="https://www.washingtonpost.com/business/2022/02/27/bp-russia-rosneft-ukraine/">over 30 years for BP</a> and <a href="https://www.ft.com/content/76db0e18-7c7e-4b96-9ee5-81dcfca18f34">more than 25 years for ExxonMobil</a>. They are accustomed to managing international political risks. </p>
<p>In my view, Russia’s invasion of Ukraine has completely changed Western energy companies’ cost-benefit analysis of doing business in Russia. I have researched <a href="https://scholar.google.com/citations?user=7lfhUj0AAAAJ&hl=en">multinational companies’ foreign direct investments</a> <a href="https://business.rice.edu/person/yan-anthea-zhang">in emerging markets</a> for over two decades and have closely followed Western energy companies’ investments in Russia. I expect that other Western oil majors, such as French company <a href="https://totalenergies.com/">TotalEnergies</a>, are also likely to pull out of Russia, and that it may take many years for these companies to reengage there. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Two men in suits smile and extend hands." src="https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=476&fit=crop&dpr=1 600w, https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=476&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=476&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=598&fit=crop&dpr=1 754w, https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=598&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=598&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">BP CEO Bob Dudley (left) shakes hands with Russian President Vladimir Putin during the Russian Energy Week forum in Moscow on Oct. 2, 2019.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/russian-president-vladimir-putin-shakes-hands-with-ceo-of-news-photo/1173086765">Mikhail Svetlov/ Getty Images</a></span>
</figcaption>
</figure>
<h2>Big risks, big payoffs</h2>
<p>Foreign investment in Russia has never been easy. For example, in 2003, BP and a consortium of Russian <a href="https://www.thestreet.com/markets/emerging-markets/what-exactly-is-a-russian-oligarch">oligarchs</a> formed the joint venture TNK-BP, which became one of the largest oil producers in Russia. However, disputes ensued over the venture’s leadership, operations and international expansion. </p>
<p>The situation became so fraught that Bob Dudley, then the head of TNK-BP and later BP’s chief executive officer, was forced to <a href="https://www.ft.com/content/8b4968fa-40d8-40ae-b2f9-f12cd8b23f9c">flee from Russia in 2008</a>. To resolve the disputes, BP sold its 50% equity in TNK-BP to Rosneft in 2013 for <a href="https://www.bloomberg.com/news/articles/2022-02-28/first-bp-now-shell-big-oil-walks-away-after-decades-in-russia-as-war-rages">$12.5 billion in cash and a nearly 20% share in Rosneft</a>. </p>
<p>Shell got involved in the early 1990s in the <a href="https://www.shell.com/about-us/major-projects/sakhalin/sakhalin-an-overview.html">Sakhalin-2 project</a> to develop natural gas reserves in Russia’s Far East, and built Russia’s first liquefied natural gas facility there. As the project neared completion in 2006, at a cost of more than $20 billion, Shell and its Japanese partners were forced to sell a 50% share to Russia’s state-owned natural gas giant, Gazprom, for $7.45 billion because Putin’s government was unhappy with the <a href="https://www.bloomberg.com/news/articles/2022-02-28/first-bp-now-shell-big-oil-walks-away-after-decades-in-russia-as-war-rages">easy terms previously offered by the Yeltsin administration</a>. </p>
<p>During crises like these, Western energy companies weighed the potential gains and costs of operating in Russia and concluded that staying in was worth it. It’s easy to see why: Russia holds <a href="https://www.worldometers.info/gas/russia-natural-gas/#">24% of the world’s total natural gas reserves</a>. It has comprehensive pipeline networks to the west to move natural gas to European countries, and large reserves to its east that are close to some of the world’s hungriest energy markets, including Japan, South Korea and China. </p>
<p>For years, Western energy companies viewed compromise with the Russian government as part of the cost of doing business there. As long as expected gains exceeded costs, they stayed.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/Tc8VjfKCoGs?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Oil companies aren’t the only businesses cutting ties with Russia in response to its invasion of Ukraine.</span></figcaption>
</figure>
<h2>Reputations matter</h2>
<p>Russia’s invasion of Ukraine has changed those calculations. Now, executives at oil majors need to assess possible broader damage to their corporate reputations and to relationships with their home country governments, shareholders and other interest groups if they stay in Russia. Unlike controversies within the energy industry, invading an independent sovereign nation is much too high profile of a development for companies to ignore.</p>
<p>Academic research shows that there is a positive correlation between <a href="https://doi.org/10.1002/csr.1480">companies’ socially responsible behaviors and financial performance</a>. Simply put, companies that do good tend to do well financially. The invasion of Ukraine represents a critical shift in Russia’s business environment. As BP Chief Executive Bernard Looney stated on Feb. 26, the situation unfolding in Ukraine “has caused us to <a href="https://www.reuters.com/business/energy/britains-bp-says-exit-stake-russian-oil-giant-rosneft-2022-02-27/">fundamentally rethink BP’s position with Rosneft</a>.” </p>
<p>In particular, Western energy companies that partner with the Russian government now may be perceived as weakening their own governments’ sanctions and helping to finance Russia’s war in Ukraine. Russia owns 40% of BP’s Russian partner, Rosneft; the company’s CEO and board chair, Igor Sechin, is <a href="https://www.washingtonpost.com/business/2022/02/27/bp-russia-rosneft-ukraine/">Russia’s former deputy prime minister and a close Putin ally</a>. Shell’s primary partner in Russia is <a href="https://www.investopedia.com/articles/markets/082615/5-biggest-russian-natural-gas-companies.asp">Gazprom, the state-run natural gas giant</a>. </p>
<p>To maintain their corporate reputations and relationships with key interest groups, BP, Shell, Equinor and ExxonMobil clearly have decided that it is important to cut their ties in Russia completely, immediately and publicly. BP’s current and former chief executive officers <a href="https://www.bp.com/en/global/corporate/news-and-insights/press-releases/bp-to-exit-rosneft-shareholding.html">resigned from Rosneft’s board of directors on Feb. 27, three days after the invasion began, “with immediate effect</a>.”</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1498975166151409665"}"></div></p>
<p>While the Western world is imposing severe and united sanctions on Russia in sectors ranging from <a href="https://www.cnet.com/how-to/what-is-swift-banking-ukraine-russia-crisis/">finance</a> to <a href="https://www.reuters.com/business/airspace-closures-after-ukraine-invasion-stretch-global-supply-chains-2022-03-01/">aviation</a>, Western governments have <a href="https://www.reuters.com/business/energy/us-has-not-sanctioned-russian-oil-traders-are-avoiding-it-2022-03-01/">avoided sanctioning energy exports from Russia</a>, seeking to protect their citizens from price spikes. Nonetheless, if Western energy companies remain in Russia and continue partnering with Russian state-owned companies, they could be perceived as undermining the Western response. Indeed, BP’s exit decision reportedly came under <a href="https://www.theguardian.com/business/2022/feb/25/bps-ties-to-russia-draw-uk-government-concern">pressure from the British government</a>. </p>
<p>None of these companies have many viable potential buyers for their Russian holdings. Russian firms, facing sanctions, don’t have the resources to acquire foreign investors’ assets, and other Western energy companies are unlikely to pursue them. The only potential investors are private equity firms that face less scrutiny than publicly traded companies, or companies from countries that don’t join Western sanctions on Russia. </p>
<p>Russia’s energy sector depends heavily upon Western companies’ technologies, especially for <a href="https://www.ft.com/content/fc354a6a-5dcb-11e4-b7a2-00144feabdc0">hard-to-recover oil projects and offshore projects</a>. BP, Shell and ExxonMobil will leave significant technological voids that could be hard for newcomers to fill. </p>
<p>Corporate leaders are used to making high-level strategic decisions that require weighing costs and benefits. What has changed the calculus for Western energy companies is the broad potential damage to their companies’ reputations and relationships with various interest groups if they stay in Russia. Clearly, executives cannot limit benefit-cost calculations to specific investments. Their overall corporate reputations can be worth billions of dollars.</p>
<p>[<em>You’re smart and curious about the world. So are The Conversation’s authors and editors.</em> <a href="https://memberservices.theconversation.com/newsletters/?source=inline-youresmart">You can read us daily by subscribing to our newsletter</a>.]</p><img src="https://counter.theconversation.com/content/178269/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yan Anthea Zhang is affiliated with the Strategic Management Society and the Academy of Management. </span></em></p>The world’s largest energy companies are used to doing business in risky places with difficult partners. But with war in Ukraine, preserving their reputations outweighs profits.Yan Anthea Zhang, Professor and Fayez Sarofim Vanguard Chair of Strategic Management, Rice UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1634302021-06-29T19:54:26Z2021-06-29T19:54:26ZPrinciples or pragmatism: does it matter where arts sponsorship comes from?<p>Perth arts organisation ARTRAGE, which runs the annual Fringe World festival, last week announced it had accepted ongoing funding from the <a href="https://www.theguardian.com/culture/2021/jun/24/they-are-not-wanted-activists-angry-over-perth-fringe-worlds-new-deal-with-mining-giant">mining company Woodside Petroleum</a>. </p>
<p>Local artists have long protested against Woodside’s position as a naming-rights sponsor of Fringe World. In response, the festival <a href="https://www.theguardian.com/culture/2020/dec/18/perths-fringe-festival-under-fire-for-gag-order-clause-in-artist-contracts">introduced a contract clause</a> artists claimed was an effective “gag order” to prevent them protesting the arrangement.</p>
<p>When that naming-rights partnership ended earlier this month, activists celebrated it as a win. But they now believe it was little more than a symbolic victory.</p>
<p>Speaking about the reworked sponsorship deal, ARTRAGE CEO <a href="https://fringeworld.com.au/news/artrage-woodside-enter-new-partnership">Sharon Burgess said</a>:</p>
<blockquote>
<p>we are excited to be embarking on a new phase of the partnership […] ARTRAGE is not in the business of making political statements or taking a stance on the subject; we will leave that up to our artists. </p>
</blockquote>
<p>From this statement, it seems artists are now welcome to protest about funding arrangements. But this is a no-win situation for the artists. If they participate in an event paid for by the mining company, they are acting as collaborators. If they decline to participate, they do not get to show their work. </p>
<p>This is a much bigger question than one festival and one sponsor. With climate change as an overarching global threat, should arts organisations take money from the companies that are part of the problem? </p>
<h2>Throwing good money after bad?</h2>
<p>Everyone in the arts is always short of money, and corporate sponsorship is often an important part of a company’s income mix. This money allows them to pay artists, reach broader audiences and keep creating new work.</p>
<p>For corporations, arts sponsorship is used to generate positive publicity. Companies want to demonstrate they are generous and socially responsible. Their profile is enhanced by the association.</p>
<p>Unsurprisingly, fossil fuel companies across the world are keen to support arts and cultural activity. Providing this support, they can appear to be part of the solution, rather than the creator of the problem.</p>
<p>Earlier this month there was a <a href="https://hyperallergic.com/658021/climate-activists-occupy-london-science-museum/">two-day protest</a> at London’s Science Museum against Shell’s sponsorship of an exhibition called Our Future Planet, looking at climate change solutions. The director of the museum, Ian Blatchford, defended the sponsorship, arguing Shell is helping in “finding solutions” through its engagement with the museum. </p>
<p>Similar protests have been held throughout the UK in recent years in relation to cultural support from BP. The <a href="https://www.theguardian.com/artanddesign/2016/mar/11/bp-to-end-tate-sponsorship-climate-protests">Tate Museum</a>, the <a href="https://www.theguardian.com/stage/2019/oct/02/royal-shakespeare-company-to-end-bp-sponsorship-deal">Royal Shakespeare Company</a> and the <a href="https://www.theguardian.com/culture/2016/apr/06/bp-ends-34-year-edinburgh-international-festival-sponsorship">Edinburgh Festival</a> have all determined they will no longer accept funding from BP.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/is-there-any-clean-money-left-to-fund-the-arts-24159">Is there any clean money left to fund the arts?</a>
</strong>
</em>
</p>
<hr>
<p>The most infamous recent case in Australia remains the 2014 protests against the relationship between the <a href="https://theconversation.com/should-artists-boycott-the-sydney-biennale-over-transfield-links-23067">Sydney Biennale and Transfield</a>. At the time, Transfield was contracted to manage the offshore detention centres in Nauru and Manus Island. </p>
<p>After the protests, the festival broke ties with their sponsor.</p>
<p>In March that year, Malcolm Turnbull (then Minister for Communications) called the artists “<a href="https://www.theguardian.com/world/2014/mar/11/malcolm-turnbull-slams-biennales-vicious-ingratitude-to-transfield">viciously ungrateful</a>”, and George Brandis (then Minister for the Arts) requested the Australia Council <a href="https://www.theaustralian.com.au/national-affairs/sydney-biennale-shame-risks-funding-says-george-brandis/news-story/28d6d9c2d7eeb4d1a3e18b0809fc9a83">craft a policy</a> saying arts organisations could “not unreasonably refuse private sector funding” on political grounds. </p>
<p>Brandis then removed $105 million from the Council in 2015.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/we-should-value-the-biennale-protest-not-threaten-arts-funding-24333">We should value the Biennale protest, not threaten arts funding</a>
</strong>
</em>
</p>
<hr>
<h2>Whose festival is it?</h2>
<p>There are many examples in Australia of arts organisations accepting sponsorship from mining companies.</p>
<p>BHP is the principal sponsor of Tarnanthi at the Art Gallery of South Australia, an important festival of Australian Aboriginal and Torres Strait Islander art. Rio Tinto was the principal sponsor of a six-year project with the Art Gallery of Western Australia, Desert River Sea: Kimberley Art Then & Now. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/408787/original/file-20210629-23-1njg7yo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Tarnanthi information booth" src="https://images.theconversation.com/files/408787/original/file-20210629-23-1njg7yo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/408787/original/file-20210629-23-1njg7yo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/408787/original/file-20210629-23-1njg7yo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/408787/original/file-20210629-23-1njg7yo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/408787/original/file-20210629-23-1njg7yo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/408787/original/file-20210629-23-1njg7yo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/408787/original/file-20210629-23-1njg7yo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Adelaide arts festival Tarnanthi is sponsored by BHP.</span>
<span class="attribution"><span class="source">PeterTea/Flickr</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>But mining companies have <a href="https://www.un.org/esa/socdev/unpfii/documents/SOWIP/en/SOWIP_web.pdf">negatively impacted</a> the traditional lands of many First Nations groups around the world, as well as important Indigenous cultural sites, such as the <a href="https://www.abc.net.au/news/2020-05-26/rio-tinto-blast-destroys-area-with-ancient-aboriginal-heritage/12286652">destruction of Juukan Gorge last year</a>.</p>
<p>Does sponsoring an Indigenous art exhibition assuage the guilt?</p>
<p>In the face of continued reduction of government contributions to the arts, Australian arts organisations have been under enormous pressure to attract both corporate sponsorship and private donations.</p>
<p>But there are many ethical dilemmas in accepting sponsorship. Being pragmatic — and accepting the money for immediate benefit — may not be wise in the long term. The brand of the arts organisation could from thereon be <a href="https://www.theguardian.com/us-news/2018/nov/19/sackler-family-members-face-mass-litigation-criminal-investigations-over-opioids-crisis">associated</a> with the sponsor, which can cause long-term damage to the arts organisation — especially when there is a belief (founded or not) the sponsor can <a href="https://www.currentaffairs.org/2017/05/blight-at-the-museum">compromise the integrity</a> of the arts organisation.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/global-arts-scene-awash-with-big-oil-and-gas-sponsorship-25221">Global arts scene awash with big oil and gas sponsorship</a>
</strong>
</em>
</p>
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<p>The size of the sponsorship can also often be <a href="https://www.theguardian.com/culture/2015/mar/02/arts-corporate-sponsorship-tate-british-museum">relatively small</a> in comparison to the overall cost of mounting the event. The price of turning off artists and audiences may be a poor exchange. </p>
<p>Tobacco companies were once, too, big arts sponsors in Australia. When this sponsorship was banned as part of Australia’s anti-smoking campaign, it was replaced with a <a href="https://www.theage.com.au/national/victoria/from-the-archives-1987-victoria-to-ban-tobacco-sponsorship-in-sport-20191002-p52x0s.html">tobacco tax</a> used to buy public health advertising space in programs or on signage of impacted sporting and cultural events.</p>
<p>It is possible to be sympathetic to the conundrum arts organisations find themselves in: mining companies are among the richest in Australia, and are therefore among the most likely to be able to sponsor arts festivals and other arts activity. </p>
<p>Perhaps one should take the money and run, and see it as a fair exchange. But no-one should imagine the gift comes without a price.</p><img src="https://counter.theconversation.com/content/163430/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jo Caust has received funding from the Australia Council. She is a member of NAVA and the Arts Industry Council (SA). </span></em></p>Perth’s Fringe World is being critiqued, again, for accepting sponsorship from Woodside Petroleum.Jo Caust, Associate Professor and Principal Fellow (Hon), School of Culture and Communication, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1456582020-10-08T14:18:11Z2020-10-08T14:18:11ZNorth Sea oil: new owners for twilight years raise questions of national interest<figure><img src="https://images.theconversation.com/files/362181/original/file-20201007-20-15bok3d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Changes in the pipeline. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/oil-platform-sunset-north-sea-1681696159">Arild Lilleboe</a></span></figcaption></figure><p>The changing of the guard in the UK North Sea has reached a symbolic turning point. The <a href="https://news.sky.com/story/end-of-an-era-as-chrysaor-flies-to-the-rescue-of-premier-oil-12091817">reverse takeover deal</a> between Chrysaor and Premier Oil overhauls BP to create a new number-one oil and gas operator, producing some 270,000 barrels of oil equivalent per day. Significantly, the new entity is <a href="https://uk.reuters.com/article/uk-premier-oil-m-a-chrysaor/chrysaor-to-take-over-premier-oil-paying-off-premier-creditors-idUKKBN26R0RN">controlled by</a> private equity. </p>
<p>The deal marks a new era in the North Sea in which private equity groups and national oil companies are steadily replacing the old oil majors to dominate the UK’s oil and gas resources. Chrysaor’s rise highlights this shift. Backed by Harbour Energy, an energy investment vehicle formed by Washington-based private equity firm EIG Global Energy Partners, it has grown rapidly by spending billions of pounds buying oil and gas fields formerly owned by <a href="https://www.chrysaor.com/downloads/news/Chrysaor%20Completion%20Release%2031.10.2017%20FINAL.PDF">Royal Dutch Shell</a> and <a href="https://www.chrysaor.com/downloads/news/Chrysaor%20completes%20acquisition%20of%20ConocoPhillips%20UK%20oil%20and%20gas%20business.pdf">ConocoPhillips</a>. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/362183/original/file-20201007-24-f0djn4.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Chrysaor logo" src="https://images.theconversation.com/files/362183/original/file-20201007-24-f0djn4.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/362183/original/file-20201007-24-f0djn4.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=522&fit=crop&dpr=1 600w, https://images.theconversation.com/files/362183/original/file-20201007-24-f0djn4.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=522&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/362183/original/file-20201007-24-f0djn4.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=522&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/362183/original/file-20201007-24-f0djn4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=656&fit=crop&dpr=1 754w, https://images.theconversation.com/files/362183/original/file-20201007-24-f0djn4.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=656&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/362183/original/file-20201007-24-f0djn4.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=656&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The new number one.</span>
<span class="attribution"><span class="source">Chrysaor</span></span>
</figcaption>
</figure>
<p>The shift in ownership offshore is influenced by UK government policy, which seeks to attract investment into the North Sea to boost production from a declining basin. But the scale of the ownership revolution has received little comment and has arguably been hastened by the pandemic. So what does it mean for UK oil and gas production to be less tied to the strategies of the traditional oil majors? And what are the consequences for an industry <a href="https://www.energyvoice.com/oilandgas/north-sea/206080/uk-oil-workforce-numbers-stabilising-new-report-says/">that employs</a> over 250,000 people and <a href="https://www.gov.uk/government/collections/oil-statistics">still provides</a> a large proportion of fuel and electricity (via gas) to the UK?</p>
<h2>Oil and COVID-19</h2>
<p>The short-term effects of COVID-19 for this sector have been severe. COVID-19 crashed demand for petrol and aviation fuel in the UK and around the world. </p>
<p>The international oil price plummeted, and at around US$40 a barrel it remains well down on the US$60-US$70 range that preceded the pandemic. Shell <a href="https://edition.cnn.com/2020/04/30/investing/shell-dividend-cut/index.html#:%7E:text=The%20Anglo%2DDutch%20firm%2C%20one,same%20period%20a%20year%20ago.">cut its dividend</a> for the first time since the second world war <a href="https://www.offshore-energy.biz/shell-books-18-billion-loss-on-huge-impairment-charges/">and reported</a> an US$18 billion loss in its second-quarter results, while <a href="https://www.reuters.com/article/us-bp-writeoffs/bp-wipes-up-to-17-5-billion-from-assets-with-bleaker-oil-outlook-idUSKBN23M0QA">BP declared</a> it would write off up to US$17.5 billion of its assets. </p>
<p>In the space of a few months, COVID-19 has crystallised questions about the future price of oil in a warming world, and the implications for oil and gas producers of sustained downturns in demand. COVID-19, it seems, has ushered in a new period of transformation for global oil, in which the future of the UK’s North Sea hangs in the balance.</p>
<h2>The new guard</h2>
<p>Yet focusing on the pandemic obscures the wider North Sea transformation over the past decade. With majors like Shell, BP, Chevron and Exxon no longer owning everything from rigs to pipelines to refineries, the effects of COVID-19 are playing out against a very different industry to that which dominated for decades. </p>
<p><a href="https://gtr.ukri.org/projects?ref=ES/S011080/1">Research by our team</a> explores the shift in ownership as part of the evolving relationship between international oil firms and the UK. BP and Shell, two of the pioneers of UK North Sea petroleum in the 1960s and 1970s, now account for less than a fifth of total oil production. </p>
<p>In all, the majors <a href="https://news.sky.com/story/end-of-an-era-as-chrysaor-flies-to-the-rescue-of-premier-oil-12091817">have sold</a> around £20 billion in UK assets in the past three years, with more <a href="https://www.cnbc.com/2020/10/04/a-100-billion-big-oil-divestiture-plan-is-coming.html">likely to come</a>. In general, they have decided to concentrate on more profitable plays elsewhere. Ironically, the Chrysaor/Premier Oil deal put paid to a deal in which Premier would have bought some of BP’s North Sea assets, but the direction of travel is clear enough. </p>
<p>After Chrysaor/Premier Oil, BP and Shell, the next most significant oil player is now CNOOC (Chinese National Offshore Oil Company). Owned by the Chinese state, CNOOC entered the UK through its US$15 billion <a href="https://www.reuters.com/article/us-nexen-cnooc/cnooc-closes-15-1-billion-acquisition-of-canadas-nexen-idUSBRE91O1A420130225">acquisition of</a> Canadian company Nexen in 2012. This advance has been mirrored by other state entities including TAQA (otherwise known as the Abu Dhabi National Energy Company) and Dana Petroleum (since 2010, a wholly owned subsidiary of the Korea National Oil Company). </p>
<p>The fact that BP and Shell are <a href="https://www.ogauthority.co.uk/news-publications/news/2020/offer-of-awards-for-the-uk-s-32nd-offshore-licensing-round/">only involved</a> in 11 of the 133 bids for acreage in the 32nd North Sea licensing round is also very telling. Most awards will go to relative minnows, many of them controlled by private equity companies that tend to seek quick returns to pay down high levels of debt. </p>
<p>There is very little discussion of whether this new North Sea ownership is in the national interest. The UK government has tended to think in terms of maximising oil and gas production and protecting jobs. The new owners are very much part of the deal because they bring investment, hire workers and support the supply chain (contrast this with the American furore that <a href="https://www.marketwatch.com/story/chinas-cnooc-walks-away-from-unocal-buyout-bid">made it impossible</a> for CNOOC to buy oil group Unocal for $18.5 billion in 2005). </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/362185/original/file-20201007-22-15s3g2y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="BP lorry driving away" src="https://images.theconversation.com/files/362185/original/file-20201007-22-15s3g2y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/362185/original/file-20201007-22-15s3g2y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/362185/original/file-20201007-22-15s3g2y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/362185/original/file-20201007-22-15s3g2y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/362185/original/file-20201007-22-15s3g2y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/362185/original/file-20201007-22-15s3g2y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/362185/original/file-20201007-22-15s3g2y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">In retreat: BP and Shell.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/northampton-uk-may-10th-2019-british-1413220967">Jevanto Productions</a></span>
</figcaption>
</figure>
<p>Nonetheless, the new arrivals are creating a sector that is different in significant ways. They are focused almost exclusively on extracting oil and gas, and have neither the broad footprint nor long-term reciprocal relationships between firm and state that developed (for better or worse) around companies like Shell and BP when they oversaw the entire petroleum production chain. There are signs that the relationship is becoming more transactional, centred on offshore access rather than issues like supplying fuel to the nation or providing the underpinning infrastructure.</p>
<p>The concern is less a narrow “national” one about whether international or UK owners exploit the North Sea than about the emerging economic model through which the UK is trying to prolong production. This increasingly rests on new entrants, many of whom do not own downstream assets in the UK such as refineries, are not subject to the disclosure requirements of publicly listed companies, and prioritise quick returns from offshore production. </p>
<p>The UK government’s <em>laissez-faire</em> attitude to ownership in an effort to maximise production has attracted a new set of firms to the UK and transformed the structure of the sector in the process. The economic model for the North Sea’s twilight years is becoming clear, and it is one in which private equity and foreign state-owned firms increasingly call the shots. Recent changes in ownership in the North Sea deserve more scrutiny and are of national interest, as they will determine who reaps the benefits and who bears the costs of the basin’s long-term decline.</p><img src="https://counter.theconversation.com/content/145658/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gavin Bridge receives funding from UKRI, Economic and Social Research Council. </span></em></p><p class="fine-print"><em><span>Alexander Dodge is affiliated with the Norwegian University of Science and Technology.</span></em></p>Chrysaor’s reverse takeover of Premier Oil creates a new number one producer in the North Sea.Gavin Bridge, Professor of Geography, Durham UniversityAlexander Dodge, Post-Doctoral Research Associate in Economic Geography, Durham UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1224502019-08-27T20:11:13Z2019-08-27T20:11:13ZWhy BP is getting into bed with David Jones. The promising marriage of petrol and gourmet food<figure><img src="https://images.theconversation.com/files/289537/original/file-20190827-8880-1nxj8h5.jpg?ixlib=rb-1.1.0&rect=472%2C99%2C1698%2C802&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It's unlikely, but for both David Jones and BP, gourmet food with petrol is the next logical step.</span> <span class="attribution"><span class="source">David Jones</span></span></figcaption></figure><p>“Fill ’er up?” </p>
<p>That was the immediate greeting from the driveway attendant when pulling into the service station in the days <a href="https://www.adelaidenow.com.au/news/south-australia/bob-byrne-laments-the-passing-of-fullservice-service-stations/news-story/40a7abd7824ce75574fae94fedb2af53">before self-serve pumps</a>.</p>
<p>Yes, once there was someone to pump your fuel and check your oil and water. </p>
<p>The colloquially named “<a href="https://www.harpercollins.com.au/9780732292102/servo-great-australian-service-stations">servo</a>” actually provided service. </p>
<p>Then, in order to reduce operational costs and remain competitive, they became “self-service” – you pumped your own fuel, pumped your own tyres, and didn’t dare ask for mechanical assistance.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/289581/original/file-20190827-184207-1qfy274.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/289581/original/file-20190827-184207-1qfy274.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/289581/original/file-20190827-184207-1qfy274.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/289581/original/file-20190827-184207-1qfy274.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/289581/original/file-20190827-184207-1qfy274.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/289581/original/file-20190827-184207-1qfy274.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/289581/original/file-20190827-184207-1qfy274.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/289581/original/file-20190827-184207-1qfy274.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">An attendant pumps petrol at Griffin’s Garage at Victor Harbor, South Australia circa 1921.</span>
<span class="attribution"><span class="source">RAA</span></span>
</figcaption>
</figure>
<p>Today’s announcement that <a href="http://www.medianet.com.au/releases/178660/">David Jones and BP are joining forces</a> to “create all-new centres of convenience” appears to mean servos are getting back into service, taking the focus off fuel prices and putting it back onto customer experience. </p>
<h2>DJs loves food</h2>
<p>David Jones has long held <a href="https://www.davidjones.com/food">food ambitions</a>. </p>
<p>Back in 2015, the new South African owner of David Jones, Woolworths Holdings (which shouldn’t be confused with Australia’s Woolworths) asked South African retailing veteran <a href="https://www.smh.com.au/business/companies/woolworths-vs-woolworths-djs-new-owner-to-overhaul-food-business-20150624-ghwgqo.html">Pieter de Wet</a> to overhaul its food business. </p>
<p>At first he rolled out “Food Stores”, similar to British retailer Marks & Spencers “<a href="https://www.bbc.com/news/business-47602566">Food Halls</a>”, inside existing David Jones stores. Then earlier this year, he launched DJ’s first <a href="https://www.insideretail.com.au/news/david-jones-to-open-first-standalone-food-store-201801">stand-alone food store</a> in Melbourne’s South Yarra.</p>
<p>Moving into fuel and convenience is a logical, although risky, move. Two service station chains have moved first.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/david-jones-seeks-to-exploit-top-end-gap-in-australian-grocery-43829">David Jones seeks to exploit top end gap in Australian grocery</a>
</strong>
</em>
</p>
<hr>
<p>Rather than competing only on fuel prices or 4 cent discounts, they are competing on “customer experience”. Stay a little longer, charge your phone and deal with some important emails. Have a barista-made espresso, or a Boost Juice. Grab a <a href="https://youfoodz.com/">YouFoodz</a> meal to take home for dinner. </p>
<h2>Service stations are rediscovering service</h2>
<p>When Singapore-based multinational <a href="https://www.pumaenergy.com/en/where-we-operate/middle-east-asia-pacific/australia/">Puma Energy</a> entered Australia’s petrol market in 2013, it acquired Ausfuel Gull, Matilda, Neumann and Central Combined Group, making it Australia’s largest fuel retailer outside the big four; Caltex, BP, Shell and Mobil.</p>
<p>In 2016 it began installing <a href="https://www.pumaenergy.com.au/news-media/news/baguette-and-brazilian-beans-hit-the-menu-at-your-local-servo/">7th Street</a> artisan café and convenience stores in its service stations, offering barista-made coffee, fresh baguettes, free Wi-Fi and phone recharging stations.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/289586/original/file-20190827-184217-1edtybw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/289586/original/file-20190827-184217-1edtybw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/289586/original/file-20190827-184217-1edtybw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=350&fit=crop&dpr=1 600w, https://images.theconversation.com/files/289586/original/file-20190827-184217-1edtybw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=350&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/289586/original/file-20190827-184217-1edtybw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=350&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/289586/original/file-20190827-184217-1edtybw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=440&fit=crop&dpr=1 754w, https://images.theconversation.com/files/289586/original/file-20190827-184217-1edtybw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=440&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/289586/original/file-20190827-184217-1edtybw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=440&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Puma Energy</span></span>
</figcaption>
</figure>
<p>Then, in 2017, Caltex also opened its first <a href="https://www.caltex.com.au/our-company/media-releases/a-fresh-take-on-fuel-and-convenience-arrives-in-sydneys-inner-west">Foodary</a>, offering “breakfast, lunch and dinner options to go, locally roasted barista-made coffee and goods from local businesses”.</p>
<p>The meal kits are from <a href="https://thecornerstore.myfoodworks.com.au/">The Corner Store</a>, the baked goods from <a href="https://www.brasseriebread.com.au/">Brasserie Bread</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/289587/original/file-20190827-184202-954j30.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/289587/original/file-20190827-184202-954j30.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/289587/original/file-20190827-184202-954j30.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=367&fit=crop&dpr=1 600w, https://images.theconversation.com/files/289587/original/file-20190827-184202-954j30.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=367&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/289587/original/file-20190827-184202-954j30.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=367&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/289587/original/file-20190827-184202-954j30.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=461&fit=crop&dpr=1 754w, https://images.theconversation.com/files/289587/original/file-20190827-184202-954j30.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=461&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/289587/original/file-20190827-184202-954j30.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=461&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Caltex</span></span>
</figcaption>
</figure>
<p>The thinking is that convenience is king. </p>
<p>We are more <a href="https://www.cbre.com.au/about/media-center/time-poor-consumers-driving-shift-to-convenience-based-retail-in-major-australian-retail-markets">time poor</a> than ever, but we don’t want to scrimp on quality. </p>
<p>The same phenomenon is contributing to the growth of <a href="https://www.mckinsey.com/industries/high-tech/our-insights/the-changing-market-for-food-delivery">meal delivery services</a>. One-third of consumers are now using a restaurant or meal delivery service, and 7% get delivery <a href="https://www.nielsen.com/us/en/insights/report/2018/the-quest-for-convenience/">once a week</a>.</p>
<p>The “premiumisation” of convenient fast food is an enormous growth opportunity, with market research company <a href="https://qsrmedia.com.au/research/in-focus/exclusive-can-australian-gourmet-burger-chains-sustain-segment-growth">IbisWorld</a> forecasting revenue growth of 4.7% through 2018-19 to A$7.6 billion, something David Jones wants to grab a part of in partnership with BP.</p>
<h2>It won’t happen everywhere</h2>
<p>Don’t expect to see a David Jones infused BP service station in your own neighbourhood any time soon. </p>
<p>DJs says over the next six months they will be “<a href="https://www.afr.com/companies/retail/david-jones-food-coming-to-a-servo-near-you-20190827-p52l2t">strategically positioned</a>” in 10 key locations in Sydney and Melbourne populated by a high proportion of “busy, urban, health-conscious customers”. </p>
<p>It can be thought of as customer segmentation, this time based on <a href="https://www.emerald.com/insight/content/doi/10.1108/07363769510146787/full/html">time and income</a>.</p>
<p>It will fragment the fuel and convenience sector. At one end will be Coles Express and Caltex Starmart, offering value and low prices. At the other will be Caltex with The Foodary, Puma with 7th Street, and David Jones/BP offering “gourmet convenience”. </p>
<h2>But it might take our minds off prices</h2>
<p>Offering a premium food and customer experience will help insulate BP from the effect of <a href="https://www.accc.gov.au/media-release/weak-australian-dollar-sees-petrol-prices-at-highest-level-in-four-years">high fuel prices</a>. </p>
<p>Last week, Coles Express announced a decline of almost 70% in earnings before interest in tax. When your offer is low prices and convenience but you can’t control fuel prices, you are at risk of losing customers. </p>
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Read more:
<a href="https://theconversation.com/aussie-retailers-need-to-adapt-to-a-world-built-on-speed-78184">Aussie retailers need to adapt to a world built on speed</a>
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</em>
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<p>Aiming at time-poor high income motorists offers protection. People filling up their BMW don’t care whether the price is $1.50 or $1.80 a litre. </p>
<p>Of course while there would be winners, there would also be losers, the biggest being traditional convenience stores and second tier supermarkets bearing brands such as IGA and Foodland, supplied by the listed wholesaler <a href="https://www.metcash.com/our-businesses/food/">Metcash</a>.</p>
<p>The ability to zip in, fill up and grab a quality food might become another nail in the coffin of the local convenience store.</p><img src="https://counter.theconversation.com/content/122450/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gary Mortimer does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>BP is offering what David Jones wants. David Jones is offering what BP needs.Gary Mortimer, Professor of Marketing and Consumer Behaviour, Queensland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/832792017-09-06T11:40:58Z2017-09-06T11:40:58ZCan the grim reality of published pay ratios really curb executive pay?<figure><img src="https://images.theconversation.com/files/184737/original/file-20170905-13714-xk6pjs.jpg?ixlib=rb-1.1.0&rect=17%2C17%2C5790%2C3860&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/midsection-businessman-placing-chess-pieces-on-244876792?src=UZ8lY0s5csdwM-yckAHcCg-1-81">Andrey_Popov/Shutterstock</a></span></figcaption></figure><p>There has always been something inherently grubby about the executive pay debate. Many of us are happy to accept that the responsibility of running a big business should be handsomely compensated. But many are also left with an uncomfortable feeling that too many top executives are being rewarded for greed or failure, or both. </p>
<p>The announcement <a href="https://www.gov.uk/government/consultations/corporate-governance-reform">by the UK government</a> that the largest of the UK’s listed companies should be required to publish (and explain) figures showing the ratio of CEO pay to average pay in their business is an attempt to shine a light into the darker corners of executive remuneration. But will this work and, if not, are tougher measures justified?</p>
<p>There is no doubt that the pay gap is getting wider. Among FTSE 100 companies in the UK, the ratio of CEO pay to average pay <a href="https://www.theguardian.com/business/nils-pratley-on-finance/2017/aug/03/executive-wages-pay-ratios-remuneration-transparent">in 1998 was 47:1</a>. By 2017, this gap had increased to 129:1. For comparison, the 2015 figure among CEOs in the US was 335:1. The widening of the gap was not slowed significantly by the financial crisis and shows no sign of diminishing over the next decade. This has had a mobilising effect on both campaign groups and on some investors who believe such wide dispersion is unacceptable.</p>
<p>In the UK, January 4, 2017 was dubbed “Fat Cat Wednesday” <a href="http://highpaycentre.org/blog/fat-cat-wednesday-2017">by the High Pay Centre think tank</a> because it represented the day by which a FTSE 100 CEO has earned more than the average UK worker earns in a year. In April 2016, BP shareholders staged one of the biggest recent revolts against a planned executive pay increase when the board proposed to raise CEO Bob Dudley’s pay by nearly 20%, in a year when the company had also run up a US$6.5 billion loss, cut thousands of jobs and frozen employee pay. </p>
<p>Some 59% of votes cast by shareholders went against the proposals. Under current UK rules, the vote was non-binding, but the message it sent to the board and to the City of London was unambiguous. BP <a href="http://www.telegraph.co.uk/business/2017/05/17/bp-heads-pay-revolt-huge-cuts-executive-pay/">decided it had little choice but to cut Dudley’s pay</a>.</p>
<h2>Less focus on ‘fair’</h2>
<p>So why has the gap grown to the point where even City investors are rebelling? Well, it hasn’t grown by the same rate across all sectors with lower ratios (68:1) in financial services mainly because it is a generally high-paying sector. Ratios are higher in retail, by comparison, where low pay <a href="https://www.jrf.org.uk/report/improving-pay-progression-and-productivity-retail-sector">remains an issue</a>. </p>
<p>There are exceptions, of course. Charlie Mayfield, chairman of the John Lewis Partnership, is paid 60 times the average (compared with 345:1 at Tesco <a href="http://highpaycentre.org/pubs/cipd-high-pay-centre-survey-of-ftse100-ceo-pay-packages-2016">and 191:1 at Sainsbury’s</a>). However, John Lewis is an employee-owned business and was a pioneer of the principle that a wide pay gap regarded as disproportionate can damage the fabric and <a href="http://www.managementtoday.co.uk/john-lewis-boss-andy-street-becomes-west-midlands-mayor/leadership-lessons/article/1323420">“common purpose” of the business</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/184696/original/file-20170905-13766-etl674.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/184696/original/file-20170905-13766-etl674.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/184696/original/file-20170905-13766-etl674.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/184696/original/file-20170905-13766-etl674.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/184696/original/file-20170905-13766-etl674.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/184696/original/file-20170905-13766-etl674.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/184696/original/file-20170905-13766-etl674.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/184696/original/file-20170905-13766-etl674.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The leading edge of pay fairness?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/declarationend/5730844671/in/photolist-9Jq5sK-9vyvBF-pK3NQW-3Xjrj-4gYLwj-4a8pNQ-duUgfK-72yTJB-pnkTg3-WcKeSG-rzwC6A-6eMnKN-4cpqrP-9Xn3aq-5XKL63-5haRzH-fwQiBp-tYZcW-87Hjds-3Rq9TJ-6oZM5M-7jZmc1-RDB6VK-4dDvQi-orD6RZ-aGUYXM-hDsvME-bExTEC-8NgevR-XQ1u3X-dEENvt-SKExn6-7bXE5o-7BQptN-kpaM9x-8anEBG-kp9VHk-qJXuC-4EXFsT-9rQh9N-Bc3UaT-PU2S1-8pW396-PUAce-76hLbP-HW4vD-8ERUpd-pK59VH-8FB6gd-79n6J8">Andy K/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>One reason for the gap is that CEO pay is compared across sectors, while low paid retail workers never have their pay rates compared with investment bankers or offshore rig operatives. Another is that remuneration committees often attach more importance to external rather than internal comparators. This means that they worry less about having an internally coherent pay structure which feels fair to employees than one which enables them to attract a “megastar” CEO when they need one. </p>
<p>Another, slightly more technical reason, is the growing complexity of CEO reward packages. Many executives have several components to their deals so that if they are forced either by the market or by regulation to restrain one element, they seem able to make up the difference with another. This can mean that, if basic pay is kept low, then bonuses or stock options can appear <a href="http://fortune.com/2015/09/02/ceo-pay-flatter-salaries-but-bigger-bonuses/">to rise to compensate</a>.</p>
<h2>Open plan pay</h2>
<p>These kinds of concerns have prompted the UK government’s action, which echoes that of the US where the Dodd-Frank Act will also <a href="http://www.cftc.gov/LawRegulation/DoddFrankAct/index.htm">require the publication</a> of pay ratios from this year. But this is more than just an issue of reporting. The hope is that CEO pay decisions will look more at internal pay relativities and the message that big rises in executive pay send to employees facing another year of pay freezes. </p>
<p>The connections between leaders and the led really matter in modern organisations. The financial crisis challenged the fragile bond of trust between bosses and employees, and widening pay gaps at a time of wage growth stagnation for most UK workers can only make things worse.</p>
<p>This makes the example of IT training company Happy Computers especially interesting. The CEO, Henry Stewart, set up a spreadsheet on the company intranet which contains both the current pay of all staff (including his) <a href="http://www.telegraph.co.uk/men/thinking-man/11587099/If-we-all-talked-about-our-salaries-would-we-earn-more.html">and their pay history</a>. Aside from creating a strong, common bond between employees and a sense of fairness and transparency, the dispersion of pay is very narrow. Stewart is very proud of this innovation and believes the company benefits enormously. When he asks other CEOs why they don’t do the same, he says the most common answer is: “Our pay isn’t fair”. </p>
<p>Not everyone agrees that a focus on pay ratios is the best way to enforce restraint. Alex Edmans of London Business School argues, <a href="https://hbr.org/2017/02/why-we-need-to-stop-obsessing-over-ceo-pay-ratios">with some justification</a>, that pay ratios can lead to perverse incentives: the temptation might be, for example, to outsource low-paid jobs in order to inflate the average pay used to calculate the ratio. The current proposals are intended as a nudge towards greater transparency, with the threat of tougher regulation if they fail to bring about restraint. </p>
<p>Unfortunately, there is no science to proportionality. The “comply or explain” approach to publishing pay ratios may slow down the rate at which the pay gap widens, and might even enforce a de facto cap, but there must be more doubt as to whether it can apply enough pressure to narrow the gap at all.</p><img src="https://counter.theconversation.com/content/83279/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Bevan receives funding from bodies such as the Office of Manpower Economics to research pay issues in the UK.</span></em></p>Workers will soon get to see just how fat the fat cats have become.Stephen Bevan, Head of HR Research Development, Institute for Employment Studies, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/663912016-10-07T19:44:30Z2016-10-07T19:44:30Z‘Deepwater Horizon’ honors oil rig workers but oversimplifies the blowout<figure><img src="https://images.theconversation.com/files/140899/original/image-20161007-21451-pe6uji.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">U.S. Coast Guard vessels battle the fire on the Deepwater Horizon while searching for survivors from the rig's 126-person crew</span> <span class="attribution"><a class="source" href="https://upload.wikimedia.org/wikipedia/commons/9/9d/Deepwater_Horizon_offshore_drilling_unit_on_fire_2010.jpg">U.S. Coast Guard/Wikipedia</a></span></figcaption></figure><p>When I went to see the movie <a href="https://www.youtube.com/watch?v=8yASbM8M2vg">“Deepwater Horizon”</a> with some of my graduate students last week, I did not expect accuracy. Drilling for oil and gas is not typically viewed favorably or depicted correctly in Hollywood movies. </p>
<p>When I tell non-oilfield people that I am a professor of petroleum engineering, someone usually brings up the dreadful movie <a href="http://www.imdb.com/title/tt0120591/">“Armageddon</a>,” in which Bruce Willis’ character, Harry Stamper (“the best deep-sea driller in the world”), is coerced into giving up his offshore drilling job to embed a nuclear bomb into an asteroid that threatens all life on Earth. Conditions on Stamper’s rig, with explosions hurling people through the air, bear little resemblance to the safe, well-controlled environment that one finds on virtually all deepwater rigs around the world.</p>
<p>I had other reasons for low expectations. Most people seem to remember that the Macondo/Deepwater Horizon blowout (more about this terminology below) caused the worst environmental oil spill in U.S. history, but forget that it also <a href="http://blog.al.com/live/2010/07/oil_spill_day_100_the_11_men_w.html">killed 11 offshore workers</a>. The idea of Hollywood profiting from sensationalizing this tragedy seemed quite inappropriate to me. </p>
<p>In the dedicated class that I teach on this disaster, I stress not only that many technical mishaps contributed to it, but also that leadership failures – largely by BP, the company that owned the well – allowed the blowout to occur. I did not think it would be possible to explain the complexities and nuances in a two-hour movie. And I worried that the film would not convey the fact that virtually all of today’s deepwater wells are safely constructed. </p>
<p>Overall, though, my students and I agreed that “Deepwater Horizon” deserves its largely positive reviews. The movie gets a number of points about the blowout wrong, but it accurately depicts the atmosphere on an offshore drilling rig. It is also a fitting testament to the workers who died in this disaster, and to others who are working to make offshore drilling safer today. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/140897/original/image-20161007-21421-1gaad4w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/140897/original/image-20161007-21421-1gaad4w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/140897/original/image-20161007-21421-1gaad4w.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/140897/original/image-20161007-21421-1gaad4w.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/140897/original/image-20161007-21421-1gaad4w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/140897/original/image-20161007-21421-1gaad4w.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/140897/original/image-20161007-21421-1gaad4w.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Caleb Holloway (Dylan O'Brien) and Mike Williams (Mark Wahlberg) on the rig in ‘Deepwater Horizon.’</span>
<span class="attribution"><a class="source" href="http://www.lionsgatepublicity.com/theatrical/deepwaterhorizon/">David Lee/Lionsgate Publicity</a></span>
</figcaption>
</figure>
<h2>Technical failures and bad decisions</h2>
<p>There are many inaccuracies in “Deepwater Horizon.” Some are small: For example, Mike Williams, chief electronics technician for Transocean (Mark Wahlberg), barrels down a flight of stairs on the rig carrying his luggage without holding any handrails, which would be a clear violation of Transocean safety policy. Other errors are much larger: The movie depicts gas breaking out around the wellhead even before the blowout event, but such a “broach” of gas to the seafloor never occurred.</p>
<p>Like <a href="https://www.gpo.gov/fdsys/pkg/GPO-OILCOMMISSION/pdf/GPO-OILCOMMISSION.pdf">investigations of the event</a>, the movie focuses primarily on the ill-fated and malfunctioning <a href="http://www.csb.gov/csb-releases-new-computer-animation-of-2010-deepwater-horizon-blowout/">blowout preventer</a> – the device designed to seal any fluids and gas beneath it and prevent them from coming to surface. But it ignores many important facts that are essential to understanding why the blowout occurred.</p>
<p>As just one example, BP made an ad-hoc and, in hindsight, poorly informed decision to circulate a fluid waste mixture into the well instead of disposing of it as waste onshore. Operators sought to use the fluid as a “spacer” to separate seawater from dense drilling mud in the well, but the solids-laden fluid may have plugged a critical line and skewed results from two “negative tests” that were designed to verify that the well was tightly sealed. The movie shows confused rig staff trying to interpret the test results, but offers no explanation.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/FCVCOWejlag?wmode=transparent&start=12" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Animation of the Macondo/Deepwater Horizon blowout, produced by the U.S. Chemical Safety Board.</span></figcaption>
</figure>
<p>The movie also gives short shrift to the implications of <a href="http://www.nola.com/news/gulf-oil-spill/index.ssf/2010/05/safety_fluid_was_removed_befor.html">removing the weighted column of mud</a> that forms a primary barrier against oil and gas rising in the well. This mud barrier is removed when drillers plug and abandon a well, but the process can precipitate a blowout if oil and gas formations deep in the well are not properly sealed with steel casing and cement. In the film, Mike Williams’ young daughter explains the process using a soda can and straw as props, resulting in a “soda blowout.” This scene comes very early, passes in an instant, and many viewers may not grasp its significance.</p>
<p>More broadly, the title of the movie is wrong: it should be “Macondo” (or at least “Macondo/Deepwater Horizon”), since Macondo was the name of the well that blew out. “Deepwater Horizon” was the name of the Transocean semi-submersible drilling rig that BP leased. As the movie shows, this rig had safely drilled numerous wells before Macondo. Names do matter: In the aftermath of the disaster, BP consistently referred to it as the “Deepwater Horizon” event, apparently trying to shift blame to Transocean. </p>
<h2>Heroes and villains</h2>
<p>On the positive side, “Deepwater Horizon” cleverly tells a human story through the eyes of Mike Williams, who becomes the hero once the rig catches fire and lives are at stake. </p>
<p>The casting is excellent, and I recognized the workers’ camaraderie and sense of duty from my own experience working offshore in the Gulf of Mexico. “Deepwater Horizon” also captures the often-tense relationship between the oil company operator (in this case, BP) and the rig contractor (here, Transocean) which often makes it difficult for the latter to go against the former’s wishes. Kurt Russell is excellent as the frustrated offshore installation manager, James “Mr. Jimmy” Harrell, and Mark Wahlberg’s performance is good enough to forgive him for not just one but two <a href="http://www.imdb.com/title/tt1637725/">“Ted” movies</a>. </p>
<p>Some performances are almost too good. John Malkovich portrays BP well site leader Donald Vidrine as a sly, uncaring villain, and the movie pins responsibility for the blowout squarely on Vidrine and rig supervisor Robert Kaluza, played by Brad Leland. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/140919/original/image-20161007-21433-j7iytx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/140919/original/image-20161007-21433-j7iytx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=899&fit=crop&dpr=1 600w, https://images.theconversation.com/files/140919/original/image-20161007-21433-j7iytx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=899&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/140919/original/image-20161007-21433-j7iytx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=899&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/140919/original/image-20161007-21433-j7iytx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1130&fit=crop&dpr=1 754w, https://images.theconversation.com/files/140919/original/image-20161007-21433-j7iytx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1130&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/140919/original/image-20161007-21433-j7iytx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1130&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">John Malkovich as Donald Vidrine.</span>
<span class="attribution"><a class="source" href="http://www.lionsgatepublicity.com/theatrical/deepwaterhorizon/">David Lee/Lionsgate Publicity</a></span>
</figcaption>
</figure>
<p>Vidrine and Kaluza <a href="https://www.justice.gov/iso/opa/resources/2520121115143638743323.pdf">were indicted</a> after the spill for involuntary manslaughter, based on their negligent supervision of two negative tests. In the movie Vidrine attributes high pressure in the drill pipe during the first negative test to an illogical “bladder effect,” and overrules Transocean on the second negative test. </p>
<p>The truth is more complicated. The “bladder effect” hypothesis was raised by a <a href="http://ccrm.berkeley.edu/pdfs_papers/bea_pdfs/dhsgfinalreport-march2011-tag.pdf">Transocean crew member</a> , not by BP, to explain ambiguities in the second negative test, not the first. (In general, “Deepwater Horizon” takes Transocean’s side of the story; I believe this perspective is appropriate, but filmmakers still should strive for balance and accuracy.) </p>
<p>Moreover, the blowout did not result from a single bad decision, but from a whole series of events that allowed barriers meant to prevent a catastrophic event to become compromised. In my view, most of this happened due to poor decisions by BP managers, both at the rig site and in the office, who were trying to curtail spending on a well that was behind schedule and significantly over budget. </p>
<p>“Deepwater Horizon” shows one example, when BP sends a Schlumberger crew home without performing a cement bond log – a measurement to verify the presence and quality of the cement used to seal the oil and gas-bearing rock formations. Without a bond log, there was no way to verify the presence of cement, let alone its quality. </p>
<p>Many viewers will be outraged to learn at the end of “Deepwater Horizon” that manslaughter charges against Vidrine and Kaluza <a href="http://www.nola.com/environment/index.ssf/2015/12/manslaughter_charges_dropped_f.html">were dismissed</a> in 2015. But these men represented an organization with a culture of cost-cutting and excessive risk-taking that also was responsible for a <a href="http://www.csb.gov/bp-america-refinery-explosion/">deadly explosion at a Texas City refinery</a> in 2005 and a <a href="http://www.nytimes.com/2006/03/15/us/large-oil-spill-in-alaska-went-undetected-for-days.html">massive oil spill</a> from the Trans-Alaska Pipeline in 2006. By portraying Vidrine and Kaluza as the only guilty parties, “Deepwater Horizon” ignores the larger failure of BP’s corporate leadership.</p>
<p>Despite these flaws, “Deepwater Horizon” is worth seeing and will certainly provoke questions. My students wanted to know much more about both technical issues and leadership mistakes after seeing the movie. Asking these questions will serve them very well in preparing them for future leadership roles in this global industry. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/140917/original/image-20161007-21423-mlolln.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/140917/original/image-20161007-21423-mlolln.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/140917/original/image-20161007-21423-mlolln.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=300&fit=crop&dpr=1 600w, https://images.theconversation.com/files/140917/original/image-20161007-21423-mlolln.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=300&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/140917/original/image-20161007-21423-mlolln.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=300&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/140917/original/image-20161007-21423-mlolln.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=377&fit=crop&dpr=1 754w, https://images.theconversation.com/files/140917/original/image-20161007-21423-mlolln.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=377&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/140917/original/image-20161007-21423-mlolln.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=377&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Global distribution of offshore oil and gas rigs (click for larger image).</span>
<span class="attribution"><a class="source" href="https://agenda.weforum.org/wp-content/uploads/2015/10/1510B09-oil-rigs-gulf-of-mexico-north-sea-chart1.png">World Economic Forum</a></span>
</figcaption>
</figure>
<p>The offshore industry has made <a href="http://www.epmag.com/moving-forward-macondo-five-years-later-789176">significant safety improvements</a> since the Macondo/Deepwater Horizon tragedy, and the Interior Department has adopted a new <a href="https://www.bsee.gov/guidance-and-regulations/regulations/well-control-rule">well control rule</a> that sets tighter standards for offshore well construction. More work remains to be done, however. </p>
<p>For my part, I hope this movie will lead to better public understanding of exactly what happened on April 20, 2010, and serve as a permanent reminder to all stakeholders involved to remain vigilant to prevent a repeat occurrence.</p><img src="https://counter.theconversation.com/content/66391/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Eric van Oort is a tenured professor at the University of Texas at Austin. He receives academic funding from the Offshore Energy Safety Institute (OESI), which in turn is funded by the Bureau of Safety and Environmental Enforcement (BSEE), a branch of the Interior Department. He also receives R&D funding from oil and gas industry companies. He is a member of the Society of Petroleum Engineers and the American Association of Drilling Engineers. Prior to his return to academia in 2012, he worked for 20 years for Shell Oil Company. He has worked as a drilling consultant for various deepwater operating companies and contractors, including BP Americas. </span></em></p>The new movie ‘Deepwater Horizon’ depicts the blowout that triggered the 2010 BP oil spill in the Gulf of Mexico. A professor of petroleum engineering assesses what the film gets right and wrong.Eric van Oort, Professor of Petroleum Engineering, The University of Texas at AustinLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/663182016-10-05T12:43:09Z2016-10-05T12:43:09ZDeepwater Horizon is remarkably fossil fuel-friendly for an oil rig disaster film<figure><img src="https://images.theconversation.com/files/140307/original/image-20161004-27269-6looxu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Lionsgate</span></span></figcaption></figure><p>Early on in the new Peter Berg film, <a href="http://www.imdb.com/title/tt1860357/">Deepwater Horizon</a>, the daughter of chief electronics technician Mike Williams (Mark Wahlberg), using a coke can as a prop, explains how oil exploration works, talking proudly of how “my daddy tames the dinosaurs”. The can spectacularly explodes while the daughter admits that “oil is a monster”. </p>
<p>Deepwater Horizon is the story of people’s relationship with oil. It is also a story of how badly this relationship can play out.</p>
<p>The film is a dramatisation of the <a href="https://theconversation.com/uk/topics/deepwater-horizon-5467">2010 disaster</a> in the Gulf of Mexico, in which the mobile offshore drilling platform Deepwater Horizon, operated by Transocean and leased to BP, suffered an explosion from an oil blowout. The rig sank, while the blowout led to the world’s largest oil spill and a major environmental catastrophe. </p>
<p>The film is billed as the story often forgotten by accounts of the disaster. Rather than cover the environmental catastrophe, the film provides <a href="https://www.youtube.com/watch?v=NNBZFm7tFM8">what Wahlberg has called</a> “the human side of the story”, covering only the immediate prelude to and aftermath of the explosion at the rig. “Based on true events,” the film is peppered with sound recordings, authentic detail and technical information. </p>
<p>With the exception of a few notable villains, the human story is about heroes. It is very much a “tribute” piece. It’s the familiar trope of “good guy” blue-collar Americans (that if left alone could actually do their job) who are victims of outside meddling. They are real and relatable people. We innately sympathise with bridge officer Andrea Fleytas (Gina Rodriguez) who can’t quite get her vintage automobile working, nor direct the oil rig to safety. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/140312/original/image-20161004-20230-prrrjt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/140312/original/image-20161004-20230-prrrjt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/140312/original/image-20161004-20230-prrrjt.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/140312/original/image-20161004-20230-prrrjt.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/140312/original/image-20161004-20230-prrrjt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/140312/original/image-20161004-20230-prrrjt.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/140312/original/image-20161004-20230-prrrjt.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Andrea Fleytas struggling with her car.</span>
<span class="attribution"><span class="source">Lionsgate</span></span>
</figcaption>
</figure>
<p>Casting a post-9/11 lens on the proceedings, we see a crewman from the rig-operating company Transocean sacrificing himself to save his friends, as a smouldering rig – a veritable skyscraper on water – collapses. A US flag burns while workers leap ten stories into the ocean below. Those rescued gather together on a nearby ship and recite The Lord’s Prayer with another American flag in the background. </p>
<p>The end credits list the 11 real-life victims of the disaster alongside their pictures. The film is sentimental and powerful. When Williams emerges from the carnage disorientated and aghast, you feel his vulnerability (a credit to Wahlberg’s acting). Unlike many Hollywood disaster movies, Berg’s picture tackles trauma maturely and with sensitivity.</p>
<h2>Taming the kraken</h2>
<p>But for a film about an oil disaster, oil doesn’t come off that badly. Yes, it’s an unruly “monster” that the rig workers are rightly superstitious and wary of. Scenes below the ocean, of a kraken awakening, aim for a Jaws or Abyss-like quality. But the black stuff is also framed as the essential lifeblood of a nation. The Trans-ocean workers reside in an oil landscape whether on or off the rig. They turn on hobs and queue up at the gas station. Berg highlights this 24-hour industrial landscape well: you can almost smell the gasoline. Deepwater Horizon’s America is not a land of Teslas and Prius’, but of countless SUVs, and there seems nothing fundamentally wrong with this. Rather than a dwindling commodity, oil is everywhere in abundance.</p>
<p>The real villains of the story are neither gas-guzzling Americans nor oil as a product, but the corporate behemoth of BP. BP executives brazenly ignore risks in the quest for profit, blindly committed to the idea that “Houston doesn’t have a problem”. The film replays <a href="http://www.nytimes.com/2010/06/19/business/19nocera.html?_r=0">press coverage of the time</a> that typically targeted BP but failed to recognise the wider problems at work. Berg sets up a familiar good-versus-evil narrative, pitting straight-talking rig manager Jimmy Harrell (Kurt Russell) against untrustworthy BP rep Donald Vidrine (John Malkovich). </p>
<p>But there’s a bigger story here, one that involves Transocean, a manager for oil contractor Halliburton (who <a href="https://www.theguardian.com/world/2014/jan/22/halliburton-manager-probation-destroying-deepwater-horizon-evidence">destroyed evidence</a> relating to the company’s role in the leak), along with <a href="http://breakingenergy.com/2015/04/27/new-offshore-oil-regulations-respond-to-key-failures-of-deepwater-horizon-spill/">poor industry regulation</a> and <a href="http://america.aljazeera.com/articles/2014/5/12/federal-govt-failedtoinspecthighriskoilandgaswells.html">flawed government oversight</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/140308/original/image-20161004-20223-1b0mts.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/140308/original/image-20161004-20223-1b0mts.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/140308/original/image-20161004-20223-1b0mts.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/140308/original/image-20161004-20223-1b0mts.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/140308/original/image-20161004-20223-1b0mts.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/140308/original/image-20161004-20223-1b0mts.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/140308/original/image-20161004-20223-1b0mts.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">John Malkovich being villainous.</span>
<span class="attribution"><span class="source">Lionsgate</span></span>
</figcaption>
</figure>
<p>The film ends with just one sentence detailing how Deepwater Horizon became the worst environmental disaster in US history. And there lies the missed opportunity of the picture. While Hollywood identifies the spill as important, and worthy of exploration, it shies from advocating real change or pushing an environmental agenda.</p>
<p>It’s a Hollywood disaster movie, not an environmental movie: more <a href="http://www.imdb.com/title/tt0072308/">The Towering Inferno</a> than <a href="http://www.imdb.com/title/tt0497116/?ref_=nv_sr_1">An Inconvenient Truth</a>. The only obvious reference to an unfolding environmental disaster is a few oil-drenched birds crash-landing onto the rescue vessel.</p>
<p>But the real story of Deepwater Horizon had another 87 days to play out and 210m US gallons to leak, with devastating effects on Gulf Coast marine life. With no environmental disaster caught on film, there is also no hint of tackling the bigger issues at the heart of all this tragedy: oil dependency, environmental exploitation and climate change. Even though we learn that the heroes turn their back on the oil industry (and never return to rigs), there is no incitation for the audience to do likewise.</p>
<p>While Deepwater Horizon achieves emotional impact, it ultimately replaces a troubling story of environmental disaster with a reassuring tale of human spirit. It is Hollywood playing it safe. </p>
<p>Berg <a href="http://www.latimes.com/entertainment/movies/la-ca-mn-deepwater-horizon-feature-20160914-snap-story.html">explained</a> his motives for the film: “To this day, when people think of Deepwater Horizon, they only think of an oil spill – they think of an oil spill and dead pelicans.” But the dead pelicans matter. We need more environmental stories, not less. Deepwater Horizon is best understood as a story of both human and environmental loss.</p><img src="https://counter.theconversation.com/content/66318/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Wills does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Hollywood turns its hand to the worst environmental disaster in US history – from which the environment is strangely missing.John Wills, Senior Lecturer in History, University of KentLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/659452016-09-23T02:59:26Z2016-09-23T02:59:26ZBP in the Bight: why the planned oil spill response is too slow to protect the coast<p>Australia’s <a href="https://www.nopsema.gov.au/">offshore petroleum industry regulator</a> is set to rule next week whether to grant oil giant BP’s application to <a href="https://theconversation.com/drilling-in-the-bight-has-bp-learnt-the-right-lessons-from-its-gulf-of-mexico-blowout-65471">drill in the Great Australian Bight</a>.</p>
<p>But <a href="http://www.bp.com/content/dam/bp-country/en_au/about-us/what-we-do/exploring-great-australian-bight/oil-spill-response-planning-strategic-overview.pdf">BP’s environmental plan</a>, released last week, suggests that the company’s proposed plan for dealing with a blowout displays less urgency than would be expected in some other parts of the world. </p>
<p>If a blowout does occur, BP proposes to cap it with a piece of equipment known as a <a href="https://www.oilspillresponse.com/services/subsea-well-intervention-services/capping/">capping stack</a>. These devices did not exist at the time of BP’s Gulf of Mexico blowout in 2010, when a capping strategy had to be developed on the run, which is why it took 87 days to cap that well. </p>
<p>Since then, capping stacks have been designed, constructed and located strategically around the world. For its proposed operations in the Bight, BP would have access to a capping stack in Singapore. It would take up to 35 days to bring this stack to the Bight and cap the well. </p>
<p>The company has rejected the suggestion that a capping stack be located locally. It claims that the time needed to transport the device from Singapore to the Bight is not a critical issue. In its earlier environmental plan, released last October, BP said that capping a blowout would require significant preparatory work, by which time the Singapore capping stack would have arrived.</p>
<p>Yet the idea of spending more than a month to plug a flowing well hardly seems compatible with avoiding major environmental damage. According to BP’s <a href="http://www.bp.com/content/dam/bp-country/en_au/about-us/what-we-do/exploring-great-australian-bight/fate-effects-oil-spill-modelling-assumptions-parameters-results.pdf">own estimate</a>, oil from a spill in the Bight could reach the shore in as little as nine days.</p>
<p>A <a href="http://www.mtshouston.org/pdfs/2014/nobleenergyhwcgjanuary2014.pdf">recent exercise in the Gulf of Mexico</a> shows that a blowout could be capped in 15 days, using a locally available capping stack. In this respect, BP’s estimate of the time it would take to cap a blowout is a long way short of industry best practice.</p>
<p>Whether or not travel time from Singapore is the critical issue, it is worth noting that there are five different capping stacks available for use in the Gulf of Mexico and three for use in UK waters. The expectation is that these stacks could be <a href="https://www.bsee.gov/sites/bsee.gov/files/tap-technical-assessment-program/756aa.pdf">on site within 24-48 hours</a>. </p>
<p>Note also that <a href="https://www.newsdeeply.com/arctic/articles/2016/07/08/new-rules-for-u-s-arctic-offshore-drilling">new rules</a> imposed by the US regulator for drilling in the Arctic require that a capping stack be located within 24 hours’ travel time of the drill site. If the Arctic justifies this level of protection, why not the Bight?</p>
<h2>Drilling a relief well</h2>
<p>Should the capping strategy fail for any reason, BP has a backup plan for stopping the flow. This is to drill a relief well to intersect the blowout well below the sea floor and “kill” it by pumping it full of heavy fluid or cement.</p>
<p>The question this raises is: where would BP find a spare drilling rig to carry out this operation? After the <a href="http://www.webcitation.org/5l3R9hPbY">Montara blowout</a> off Western Australia in 2009, a suitable drilling rig was located near Singapore. But this rig would have been no use in the deep water of the Bight.</p>
<p>Oil companies operating in Australian waters have a memorandum of understanding among themselves to provide a suitable drilling rig in an emergency. Yet it remains unclear how easy it would be for another company to release a rig quickly for this purpose. As such, BP has assumed that it will take up to 149 days to acquire an appropriate rig, drill a relief well and plug the blowout.</p>
<p>The new Arctic regulations require that a relief rig be available nearby, to guarantee that a relief well can be drilled before winter sea ice moves in. The situation in the Bight is not as constrained by the seasons, but even so, 149 days seems an unacceptably long time to plug a well. </p>
<p>The Gulf of Mexico blowout was stopped in 87 days, during which time it inflicted <a href="http://www.cchbooks.com.au/disastrous-decisions-the-human-and-organisational-causes-of-the-gulf-of-mexico-blowout">damage worth at least A$40 billion</a>. Who knows what the toll would have been if it had lasted almost twice as long?</p>
<h2>Protecting the shore</h2>
<p>Finally, BP has various strategies for reducing the amount of oil reaching the shoreline in the event of a spill. These include using dispersant chemicals, both subsea, at the point of release, and on the sea surface. The company puts particular emphasis on subsea dispersal, but recognises that this strategy would also be subject to delay. </p>
<p>It estimates that subsea dispersal would begin within 10 days “<a href="http://www.bp.com/content/dam/bp-country/en_au/about-us/what-we-do/exploring-great-australian-bight/oil-spill-response-planning-strategic-overview.pdf">where that is possible</a>”. This can never be a fully effective way to prevent coastal pollution, because BP’s modelling suggests oil would begin arriving on the coast in less time than this.</p>
<p>BP has also noted that traditional methods of containment and recovery of oil using booms and skimmers “are not expected to provide significant benefit” in the open ocean.</p>
<p>What seems more likely in the event of a spill is that the company will find itself fighting a last-ditch battle against the oil as it approaches sensitive parts of the shoreline, and where this fails it will implement shoreline and oiled wildlife clean-up.</p>
<p>It is difficult to forecast any other scenario, given the time frames described in BP’s own documents. Its published response plan gives no guarantee that an oil spill in the Bight would not reach the shoreline and damage the environment.</p>
<p>Experience elsewhere in the world suggests that these timelines can be tightened. The question for the regulator is whether BP has reduced the risk to a level that is “<a href="https://www.nopsema.gov.au/assets/Corporate/A477256.pdf">as low as reasonably practicable</a>”. </p>
<p>It is by no means obvious that the answer is yes.</p>
<hr>
<p><em>Andrew Hopkins is the author of <a href="http://www.cchbooks.com.au/disastrous-decisions-the-human-and-organisational-causes-of-the-gulf-of-mexico-blowout/">Disastrous Decisions: The Human and Organisational Causes of the Gulf of Mexico Blowout</a>.</em></p><img src="https://counter.theconversation.com/content/65945/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Hopkins does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>BP’s plans for the Bight say it would take 10 days to begin dispersing an oil spill at source, and 35 days for well-capping equipment to reach the site – making it likely that oil would hit the coast.Andrew Hopkins, Emeritus Professor of Sociology, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/654712016-09-15T20:14:43Z2016-09-15T20:14:43ZDrilling in the Bight: has BP learnt the right lessons from its Gulf of Mexico blowout?<p>The Guardian newspaper recently <a href="https://www.theguardian.com/environment/2016/sep/12/call-to-halt-great-australian-bight-oil-drilling-amid-faulty-equipment-fears">hit a wall of non-response</a> when it raised concerns about the possibility of an oil well blowout in BP’s <a href="https://www.theguardian.com/business/2016/sep/09/senators-vow-fresh-scrutiny-of-bps-plans-to-drill-for-oil-in-great-australian-bight">proposed drilling operations in the Great Australian Bight</a>. </p>
<p>The facts are that bolts on drilling rigs used in other parts of the world have been <a href="http://www.rigzone.com/news/oil_gas/a/124169/DOI_Calls_for_Drillers_to_Inspect_Replace_Bolts_after_Defects_Found">found to be defective</a>, with the <a href="http://www.houstonchronicle.com/business/energy/article/In-offshore-Gulf-fears-over-failing-bolts-persist-8393307.php">potential to fail catastrophically</a>. When asked whether its operations were at similar risk, BP referred The Guardian to its subcontractor, <a href="http://www.diamondoffshore.com/">Diamond Offshore</a>, which reportedly failed to respond to emails and phone calls. </p>
<p>Whether or not these technical concerns are justified, this is a public relations disaster for BP, Diamond Offshore and even for the Australian industry regulator, the <a href="https://www.nopsema.gov.au/">National Offshore Petroleum Safety and Environmental Management Authority</a>. </p>
<p>BP, in particular, can ill afford such bad publicity. Six years ago it suffered a <a href="http://www.cchbooks.com.au/disastrous-decisions-the-human-and-organisational-causes-of-the-gulf-of-mexico-blowout/">disastrous blowout</a> of its Macondo well in the Gulf of Mexico, which killed 11 men and caused more than US$40 billion of environmental damage along the US coast. </p>
<p>It’s perfectly understandable that people will ask whether the same thing can happen in the Great Australian Bight.</p>
<h2>Lessons learnt?</h2>
<p>BP claims to have learnt the lessons from the Gulf of Mexico incident, and to have incorporated them in its drilling plan for the Bight (as outlined in section 6 of its <a href="http://www.bp.com/content/dam/bp-country/en_au/about-us/what-we-do/exploring-great-australian-bight/environment-plan-overview.pdf">environmental overview</a>). However, the lessons it refers to are drawn from its own <a href="http://www.bp.com/content/dam/bp/pdf/sustainability/issue-reports/Deepwater_Horizon_Accident_Investigation_Report.pdf">report</a> on the accident, which dealt primarily with technical issues rather than the underpinning organisational factors.</p>
<p>Other <a href="http://www.csb.gov/macondo-blowout-and-explosion/">major reports</a> and <a href="http://www.cchbooks.com.au/disastrous-decisions-the-human-and-organisational-causes-of-the-gulf-of-mexico-blowout/">commentary</a> have identified a range of organisational failures that contributed to the blowout. BP has not shown that it has learnt these bigger lessons.</p>
<p>One of these organisational causes was the system of bonus payments made to employees at all levels, which created continual pressure to minimise costs and maximise drilling speeds. A key performance indicator when calculating employee bonuses was “days per 10,000 feet of well drilled”. </p>
<p>These incentives generated pressure to ignore anomalies or warnings that things might be amiss, and to just get on with the job. Of course, BP is not alone in this – these are industry-wide practices. But to satisfy a sceptical public, BP needs to show that it has addressed this issue.</p>
<p>Second, BP was using the wrong indicators of risk, which meant that it was systematically misleading itself and others about the risk of blowout at the Macondo well. </p>
<p>Its primary indicator was the number of cases of “loss of containment” – that is, incidents when oil was spilled into the sea from a hydraulic hose or other piece of equipment. Of course these spills are environmentally undesirable, but the number of these relatively minor incidents does not in itself indicate a risk that the well will blow. </p>
<p>Far more significant is the number of “kicks” – incidents in which operators temporarily lose control of the well and high-pressure fluids begin forcing their way towards the surface. If operators do not act quickly to control kicks, they can develop into blowouts, and indeed this was one of the <a href="http://www.cchbooks.com.au/disastrous-decisions-the-human-and-organisational-causes-of-the-gulf-of-mexico-blowout/">contributing factors</a> in the Gulf of Mexico blowout. </p>
<p>Here is another relevant indicator. Drilling wells involves pumping cement down at various times to seal joints, and to plug the bottom of the well when drilling is complete but the well is yet to begin production. Cementing jobs sometimes fail, and in fact the regulator in the Gulf of Mexico <a href="http://drillingcontractor.org/dcpi/dc-julyaug07/DC_July07_MMSBlowouts.pdf">found</a> that half of all blowouts were initiated by a cementing failure. </p>
<p>The number of cementing failures would therefore seem to be an important indicator of risk. BP again needs to show it has developed a list of key risk indicators for its proposed drilling operations in the Bight, and that things such as employee bonuses will not work to counteract this system.</p>
<h2>Bending the rules</h2>
<p>One of the most insidious processes that contributes to many major accidents is the “normalisation” of substandard practices. Typically, this happens when people start taking shortcuts with no penalty, which gives the impression that strict compliance with safety regulations or standard engineering practices is unnecessary. Eventually, however, an unusual set of circumstances may catch them out. </p>
<p>Some companies have a formal process for authorising deviations from the standard practice, in cases where strict compliance seems unnecessary or onerous. In isolation, such deviations may seem to involve a negligible increase in risk, but if the number of such authorisations is not controlled, the cumulative increase in risk may be considerable. </p>
<p>After the Gulf of Mexico disaster, BP itself <a href="http://www.cchbooks.com.au/disastrous-decisions-the-human-and-organisational-causes-of-the-gulf-of-mexico-blowout/">proposed</a> that the number of authorised deviations from approved engineering practices be treated as an indicator of risk, and that this number should be kept as low as possible. It would be good to know if this principle will be applied to its drilling activities in the Bight.</p>
<p>Another critical lesson from the Gulf of Mexico spill is that senior managers should ask the right questions when they visit operational sites, as they routinely do. Senior managers were actually touring the rig that was drilling the Macondo well at the time of the blowout. But they failed to ask any questions about how well the rig was controlling the blowout risk. Had they done so, the accident might never have happened. Has BP learnt that lesson? It is not one that was identified in its own report, so we cannot be sure.</p>
<p>Accident prevention depends on understanding and counteracting the human and organisational factors that lead to accidents, as well as the technical ones. The documents that BP has publicly released about how it intends to drill in the Bight describe how it has learnt the technical lessons, but are silent on the human and organisational lessons. </p>
<p>Spelling out these lessons, and whether BP really has learnt them, might give the public more confidence in the drilling proposal.</p>
<hr>
<p><em>Andrew Hopkins is the author of <a href="http://www.cchbooks.com.au/disastrous-decisions-the-human-and-organisational-causes-of-the-gulf-of-mexico-blowout/">Disastrous Decisions: The Human and Organisational Causes of the Gulf of Mexico Blowout</a>.</em></p><img src="https://counter.theconversation.com/content/65471/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Hopkins is the author of a recent article published by (but not funded by) the Australia Institute, titled "From climate pariah to climate saviour? What the petroleum industry can do about climate change".</span></em></p>As BP plans to drill for oil in the Great Australian Bight, questions can be asked about whether it has made the right changes to its working practices to avoid a repeat of the 2010 Gulf of Mexico disaster.Andrew Hopkins, Emeritus Professor of Sociology, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/521272015-12-10T21:19:25Z2015-12-10T21:19:25ZWhy is the business world suddenly clamouring for a global carbon tax?<p>Among the various interests at the Paris climate talks, it is arguably the voice of business that has <a href="https://theconversation.com/the-earth-has-moved-big-businesss-radical-climate-shift-is-now-unstoppable-52119">emerged most clearly</a>. Many business leaders are <a href="http://www.worldbank.org/en/news/press-release/2015/11/30/heads-of-state-and-ceos-declare-support-for-carbon-pricing-to-transform-global-economy">now saying</a> that if the world is intent on reducing greenhouse gas emissions, there must be a <a href="https://theconversation.com/explainer-the-difference-between-a-carbon-tax-and-an-ets-1679">worldwide price on carbon</a> and a framework for linking the <a href="http://www.ft.com/intl/cms/s/0/e11d8346-98f8-11e5-95c7-d47aa298f769.html#axzz3trdUuXgk">55 schemes</a> that exist in areas such as China, the European Union, and California.</p>
<p>Momentum has been building since May, when six of Europe’s largest oil and gas companies, including Royal Dutch Shell and BP, <a href="http://www.ft.com/intl/cms/s/0/2fc5662e-0643-11e5-b676-00144feabdc0.html#axzz3trdUuXgk">issued a letter</a> calling for global carbon pricing system. That month, leaders from 59 international companies also <a href="http://www.ft.com/intl/cms/s/0/e11d8346-98f8-11e5-95c7-d47aa298f769.html#axzz3trdUuXgk">signed a statement</a> calling for carbon pricing to feature in the Paris agreement.</p>
<p>Advocacy has continued during the Paris negotiations. For example, <a href="http://www.ft.com/intl/cms/s/0/83635d34-9dd0-11e5-b45d-4812f209f861.html#axzz3trdUuXgk">Patrick Pouyanné</a>, chief executive of French oil and gas giant <a href="http://www.total.com/">Total</a>, argued that the shift from coal to gas “will not happen without a carbon price”. He suggested that a price of US$20-$50 in Europe was required (well above the <a href="http://uk.reuters.com/article/us-europe-carbon-survey-idUKKBN0OB0YI20150526">current</a> price). </p>
<p><a href="http://www.ft.com/intl/cms/s/0/34c3a69e-9d02-11e5-b45d-4812f209f861.html#axzz3trdUuXgk">Oleg Deripaska</a>, president of the world’s largest aluminium producer <a href="http://www.rusal.ru/en/">Rusal</a>, put the issue in stronger terms, describing the idea of <a href="https://cdn.theconversation.com/infographics/190/8c77ad2c631b947ec1188bf545bc5376f6623e31/site/index.html?lat=-25&lng=-25&zoom=3">voluntary national emissions commitments</a> (upon which the Paris agreement largely hinges) as “balderdash”. </p>
<p>Asked what success would look like from the Paris negotiations, Deripaska replied:</p>
<blockquote>
<p>A success [for most people] would be lunch at a nice French banquette with foie gras and oysters. But no, seriously, it is carbon tax or die.</p>
</blockquote>
<h2>Carbon tax on the menu?</h2>
<p>It is not clear whether a carbon price will figure in the <a href="http://unfccc.int/resource/docs/2015/cop21/eng/da01.pdf">Paris agreement</a>. But it is important to consider what is motivating some of the world’s highest-emitting companies to advocate for a carbon price. And what other, perhaps more intrusive plans for tackling climate change would be taken off the table?</p>
<p>Businesses have a <a href="http://www.npr.org/2015/12/01/458020744/businesses-awaken-to-the-opportunities-of-action-on-climate-change">stronger presence</a> at COP21 than at any previous climate negotiation. They <a href="https://theconversation.com/business-big-hitters-highlight-the-huge-growth-in-climate-risk-management-51848">know which way the wind is blowing</a> and realise that governments might require painful and complex interventions to reduce emissions. Moves are afoot to decarbonise the world economy some time after 2050 (see Article 3 of the <a href="http://unfccc.int/resource/docs/2015/cop21/eng/da02.pdf">latest draft text</a>, and there has been strong advocacy for a <a href="http://www.abc.net.au/news/2015-11-19/kiribati-president-urges-world-leaders-moratorium-coal-mines/6953930">moratorium</a> on new coal mines.</p>
<p><a href="http://www.ft.com/intl/cms/s/0/e11d8346-98f8-11e5-95c7-d47aa298f769.html#axzz3trdUuXgk">Helge Lund</a>, chief executive of British oil multinational <a href="http://www.bg-group.com/">BG Group</a>, argues that a carbon price reduces government intervention and attempts at “pick[ing] winners in terms of energy technologies.” Instead, he argues: “the market will dictate the most efficient solution”. </p>
<p>Forecasts from the <a href="http://www.worldenergyoutlook.org/">International Energy Agency</a> suggest that fossil fuels (including coal) will provide the bulk of energy demand for developing countries going into the future. Companies intend to meet that demand. Thus, Shell can simultaneously advocate putting a price on carbon and make <a href="https://theconversation.com/shell-chief-calls-for-climate-action-but-what-are-the-firms-motives-37644">plans to drill in the Arctic</a> where production will not begin until 2030. </p>
<p>While that might sound perverse, there is actually nothing inconsistent about those two positions. </p>
<p>One way for energy companies to maintain economic growth in a carbon-priced economy is to shift investments gradually away from coal and oil, and towards gas. That is why Shell has paid <a href="http://www.smh.com.au/business/energy/accc-clears-shells-us70b-takeover-of-bg-group-20151118-gl2hwl.html">US$70 billion for the BG Group</a>. </p>
<p>Of course gas might come under similar pressure in time, but as the <a href="http://www.ft.com/intl/cms/s/0/ede0412c-0780-11e5-9579-00144feabdc0.html#axzz3trdUuXgk">Financial Times</a> has reported: </p>
<blockquote>
<p>…oil companies’ skills and assets mean that finding and extracting gas is a short and natural step. Moving into renewable energy is a much bigger leap.</p>
</blockquote>
<p>This can be seen in the many examples where energy companies have struggled to develop other forms of energy, such as BP’s ill-starred attempt to brand itself as “<a href="http://www.theguardian.com/environment/2008/nov/20/fossilfuels-energy">beyond petroleum</a>” and invest US$8 billion over ten years in renewable energy. The company has since <a href="http://www.ft.com/intl/cms/s/0/ede0412c-0780-11e5-9579-00144feabdc0.html#axzz3trdUuXgk">backtracked</a> on that goal, has left the solar market, and has no plans to expand its onshore wind investments. </p>
<h2>Beyond markets</h2>
<p>Of the 185 countries that have <a href="http://www4.unfccc.int/submissions/indc/Submission%20Pages/submissions.aspx">submitted climate targets</a> ahead of the Paris talks, <a href="http://www.ft.com/intl/cms/s/0/e11d8346-98f8-11e5-95c7-d47aa298f769.html#axzz3trdUuXgk">more than 80</a> have referenced market mechanisms. </p>
<p>Clearly, a price on carbon is going to play a role in attempts to tackle climate change. This is a good thing but it is not sufficient and must not become a distraction from other serious interventions. </p>
<p>Recent research confirms that we do not have time to wait for energy companies to transition at their own pace from fossil fuels to renewable energy. For example, last week <a href="http://www.tyndall.ac.uk/people/Kevin-Anderson">Kevin Anderson</a> from the Tyndall Centre for Climate Change Research published a paper in <a href="http://www.nature.com/ngeo/journal/v8/n12/full/ngeo2559.html">Nature Geoscience</a> which argued: </p>
<blockquote>
<p>The carbon budgets associated with a 2°C threshold demand profound changes to the consumption and production of energy … the IPCC’s 1,000 gigatonne budget requires an end to all carbon emissions from energy systems by 2050. </p>
</blockquote>
<p>A carbon budget consistent with 2°C (let alone 1.5°C) requires a dramatic reversal in energy consumption and emissions growth. Governments should treat overtures from business with caution, even if businesses are making the right moves. They need to ensure that these moves are made at a speed that suits the climate, rather than just business.</p><img src="https://counter.theconversation.com/content/52127/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Burdon is affiliated with the International Union for the Conservation of Nature.</span></em></p>Even oil companies have started asking for a price on carbon, not least because it could help them avoid other, stricter forms of regulation.Peter Burdon, Associate Professor, Adelaide Law School, University of AdelaideLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/416352015-05-12T11:27:06Z2015-05-12T11:27:06ZWe need to protect the whistleblowers who save our skins but pay the price<figure><img src="https://images.theconversation.com/files/81243/original/image-20150511-19566-1d4qvq1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Approach with caution.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/pinti1/5271233914/">Holly Occhipinti</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>The <a href="http://www.midstaffspublicinquiry.com/">recent Francis Report</a> into how poor care at Mid-Staffordshire Foundation Trust was allowed to happen, was another lesson in just how valuable whistleblowers are to society. And yet as a society, we don’t seem to care that many struggle to survive. </p>
<p>Whistleblowers perform a vital role in today’s world. They alert the public to <a href="https://www.sec.gov/whistleblower">financial fraud</a>, <a href="http://www.theguardian.com/healthcare-network/2015/jan/29/francis-review-nhs-whistleblower-report">abuse in institutions</a> and potential environmental disasters. For years, the NHS ignored attempts by whistleblowers to raise concerns about care that was <a href="https://freedomtospeakup.org.uk/wp-content/uploads/2014/07/F2SU_Executive-summary.pdf">“substandard, and sometimes unsafe”</a>, while we now know that the Deepwater Horizon disaster of 2010 could have been prevented had BP listened to just one of the many warnings coming from <a href="http://www.newsweek.com/what-bp-doesnt-want-you-know-about-2010-gulf-spill-63015">whistleblowers inside the company</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/81380/original/image-20150512-22586-g83y1v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/81380/original/image-20150512-22586-g83y1v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/81380/original/image-20150512-22586-g83y1v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=300&fit=crop&dpr=1 600w, https://images.theconversation.com/files/81380/original/image-20150512-22586-g83y1v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=300&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/81380/original/image-20150512-22586-g83y1v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=300&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/81380/original/image-20150512-22586-g83y1v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=377&fit=crop&dpr=1 754w, https://images.theconversation.com/files/81380/original/image-20150512-22586-g83y1v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=377&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/81380/original/image-20150512-22586-g83y1v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=377&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Delivering a clearer picture. NHS whistleblowers.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/jamin2/3555151084/in/photolist-6qa5ym-7Wu65B-49Jq6-5T8jXr-suP5E-ntrXJg-sKzMJ-cZEZrh-hgAm6v-bCWhDp-bpbRBL-97bQqz-8HS4FM-aYKWJi-hgBAEB-aYKVVZ-8bNSbx-nr21vh-aYKXSF-aYKXaR-aYKWXH-9nLAXL-aYKVga-aAFdYp-7Us9Fk-a8azsX-8b1dAN-7Czew1-24DCfR-91dcEq-7m5bc-7X3a9m-fFT5ta-9FpR14-7Us3vm-sxfK5-9v3wWc-cNKaoo-7UoL1X-7Lopqo-8e4AVW-e7TPHb-aYKXD6-cPELM9-9rvomT-7UwUjw-7Z5KhX-9nLjGy-7Ym1Ph-7Uvm77">Benjamin Ellis</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>As well as preventing damaging incidents like these, whistleblowers can also save companies and organisations some serious cash. In recent years, private sector whistleblowers have alerted their bosses to more serious economic crimes than were spotted by all the “official” fraud-spotters combined – the internal auditors, corporate security personnel and law enforcers – <a href="http://blog.transparency.org/2012/10/01/corporate-whistleblowers-gain-new-rights-and-opportunities-in-the-us">saving on average $3m per case</a>. </p>
<p>So these people prevent disasters and save money; what’s not to admire? In fact, 80% of people in the UK report that they would speak out if they witnessed serious corruption in their organisation.</p>
<h2>Safety net?</h2>
<p>While we may admire whistleblowers and celebrate their bravery, we don’t seem to want to help those who struggle for years. The message for many who are forced to go outside their organisation is clear: you may never work in your industry again because of your disclosure, and there is zero financial support available to help you.</p>
<p>How does this happen? We know that whistleblowers who go public tend to experience a subtle, informal kind of blacklisting in their industry. Organisations tend not to want to hire well-known whistleblowers, and in the age of Google, it is easy to find out who these people are when a CV arrives on the desk of the Human Resources manager. This means that a whistleblower who goes public has a <a href="http://www.uk.sagepub.com/fineman/Reading%20On/Chapter%2012d%20-%20Rothschild%20and%20Miethe.pdf">high chance of never being re-hired</a> in their area of expertise. </p>
<p>In the UK, the careers of senior and successful doctors and nurses <a href="http://www.telegraph.co.uk/news/health/news/11403069/Whistleblowing-NHS-crushes-those-who-speak-out-Sir-Robert-Francis-QC-warns.html">“were left on the scrapheap”</a> after they attempted to let NHS managers know about dangerous practices, many of which risked patients’ lives. Well known examples from the financial services sector include Eileen Foster, award-winning whistleblower who disclosed mortgage fraud at Countrywide, now Bank of America, and was the subject of a <a href="http://www.cbsnews.com/news/prosecuting-wall-street/">60 minutes documentary</a> that received great acclaim. Despite her stellar credentials, not one of her first <a href="http://www.publicintegrity.org/2011/09/22/6687/countrywide-protected-%20fraudsters-silencing-whistleblowers-say-former-employees">145 job applications received a response</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/81237/original/image-20150511-19560-730wvx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/81237/original/image-20150511-19560-730wvx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/81237/original/image-20150511-19560-730wvx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/81237/original/image-20150511-19560-730wvx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/81237/original/image-20150511-19560-730wvx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/81237/original/image-20150511-19560-730wvx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/81237/original/image-20150511-19560-730wvx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/81237/original/image-20150511-19560-730wvx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Eileen Foster, receives the 2012 Ridenhour Prize for Truth-Telling.</span>
<span class="attribution"><a class="source" href="http://www.ridenhour.org/press_room_prizes_images.html">Ridenhour Prizes</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Martin Woods’ disclosures to the U.S. Department of Justice led to the <a href="http://www.theguardian.com/world/2011/apr/03/us-bank-mexico-drug-gangs">biggest ever action</a> to be brought under the US Bank Secrecy Act against his ex-employer Wachovia for its facilitation of money-laundering. He thought he had got lucky when he secured a new job with a leading UK private bank. As it turned out, the new firm didn’t yet know who he was. When they found out that he was a whistleblower, they withdrew their offer immediately <a href="http://www.ianfraser.org/rbs-accused-of-withdrawing-job-offer-to-mexico-drug-deals-whistleblower/">and fought off a court case</a>. As Woods’ experience demonstrates, the legislation that exists to prevent potential employers from discriminating against whistleblowers at the recruitment stage, is often ineffective.</p>
<h2>Paying a price</h2>
<p>So these brave individuals are often left with no job, no income and a mounting pile of bills, including for legal and medical costs that typically accompany a lengthy and usually stressful whistleblowing campaign against a retaliatory organisation. It doesn’t help that whistleblowers who disclose serious and systemic wrongdoing tend to be in senior positions, and often have families to support. The cost of disclosing, it seems, can be bankruptcy. Would four out of five Britons really speak up in the case of serious wrongdoing, if they knew the full extent of the sacrifice that might be required? The situation is dangerous; we can assume that this fact is currently discouraging the many would-be whistleblowers who have taken the time to consider the likely outcomes for themselves and their families.</p>
<p>What can be done about this? Legislation exists that grants whistleblowers some compensation if they can prove that they have been let go from their organisation <a href="http://www.pcaw.org.uk/guide-to-pida#overview-of-the-provisions">as a result of their disclosures</a>. However not everyone is successful in bringing a case, and it costs money to get the legal help needed to pursue this. </p>
<p>To remedy the situation, <a href="http://www.wbuk.org/">advocacy groups like Whistleblowers UK</a> have proposed that a support fund be created, generated from the fines paid by organisations when they are penalised for wrongdoing, and <a href="http://www.wbuk.org/pdf/whistleblowing-commission.pdf">administered by an independent “Office of the Whistleblower”</a>. This is one solution. The <a href="http://www.forbes.com/sites/billsinger/2012/08/21/first-sec-whistleblower-bounties-awarded-and-denied/">bounty system in the US</a>, by which successful whistleblowers receive a payout based on a percentage of the money that their disclosure has saved the US government, is another. Similar schemes have been <a href="http://www.kluwerlawonline.com/abstract.php?id=EUCL2012032&PHPSESSID=os4b69bhe5fgmasm9t4m10mb36">mooted in Europe</a>, to some <a href="http://www.25bedfordrow.com/news-pdfs/whistleblowing.pdf">controversy</a>.</p>
<p>Whatever your view, it is clear that something needs to change. First, we need to know more: about the full costs of whistleblowing for those who leave their organisation, and about the kinds of interventions that might help to rehabilitate people’s careers if they find themselves in this situation. Once we have this knowledge, then we can begin to plan how we can help people to survive, after they have risked their lives and incomes for our sakes.</p><img src="https://counter.theconversation.com/content/41635/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kate Kenny receives funding from the British Academy and JE Safra Centre for Ethics at Harvard University.</span></em></p>When employees of dodgy companies or slipshod institutions put it all on the line to do the right thing, why do we hang them out to dry?Kate Kenny, Reader in Management, Queen's University BelfastLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/403072015-04-22T19:45:46Z2015-04-22T19:45:46ZLessons from an oil spill: how BP gained - then lost - our trust<p>The Deepwater Horizon oil spill disaster in the Gulf of Mexico in 2010 is one of the most exhaustively analysed environmental and management crises in recent history. And BP‘s response will probably be remembered for a generation as the perfect example of how not to manage a crisis.</p>
<p>But it wasn’t always that way. This year marks the 25th anniversary of another BP oil spill which is now virtually forgotten, but was regarded at the time as a gold standard in how to respond effectively and protect reputation.</p>
<p>Although it is eclipsed by a litany of subsequent high profile oil spill disasters – such as the Erika breaking up off Brittany in 1999 and the Montara oil rig fire off northwest Australia in 2009 – there is much to be learned from what happened 25 years ago on the coast of Southern California.</p>
<p>In February 1990, less than a year after the debacle of the Exxon Valdez running aground in Alaska, the BP-chartered tanker American Trader accidentally ran over its own anchor off Huntington Beach in Orange County, spilling 400,000 gallons of crude oil, which came ashore on the prestigious surfing strip.</p>
<p>BP’s response was prompt and unequivocal. In just over two hours, oil skimming vessels were on the scene and the company’s crisis team was in the air. And within 24 hours there were 36 BP specialists on-site.</p>
<p>Even more impressive was the leadership of BP America Chairman James Ross, who flew straight to the scene. In a memorable press conference on the polluted breach Ross told reporters: “Our lawyers tell us it’s not our fault. But we feel like it’s our fault and we are going to act like it’s our own fault.”</p>
<p>Contrast this statesmanlike approach with the denial and blame-shifting which blighted BP’s response in 2010 when fire destroyed the oil rig Deepwater Horizon in the Gulf of Mexico, killing 11 workers and starting a torrent of oil onto a massive swathe of coastline. Then-BP CEO Tony Hayward commented that the amount of oil was “relatively tiny in a very big ocean.” His now infamous comment to the media that he would “like his life back”, was dubbed by the New York Times as “the sound bite from hell”.</p>
<p>The clean-up at Huntington Beach was swift and efficient. More than 100 people from other big oil companies took part on the spill response, and BP trained and equipped volunteer bird rescuers, who became some of the company’s strongest supporters in the community. And they worked very closely with government agencies, and the parade of political figures who wanted to be photographed on the beach. Ross later commented: “We are convinced that by working with them, we avoided jurisdictional disputes and a ton of controversy.”</p>
<p>The outcome is strikingly evident. The Los Angeles Times ran a story praising the company’s efforts under the headline “After spill, BP soaks up oil and good press.” It later ran a front-page photograph of the company’s crisis manager fulfilling his pledge to be the first to swim at the cleaned-up beach.</p>
<p>When BP America President James Ross was summoned to Washington he found himself praised by lawmakers. Compare that with the concerted attack by American politicians on BP after the Deepwater Horizon spill. President Barack Obama himself called for Hayward to be sacked. </p>
<p>Of course the volume of the Deepwater Horizon spill was much greater. But the lesson for today is not about the challenges of clean-up. It’s about the response at a management level, and what it teaches us about crisis leadership.
Just like the Huntington Beach spill, James Ross too was quickly forgotten by the media and he went on to a successful career as CEO of Cable and Wireless and company Director. </p>
<p>By contrast British-born Hayward was famously pilloried by a headline in the New York Times - “BP’s CEO Tony Hayward: The most hated – and most clueless – man in America.” And when he was appointed to a role in a small oil company two years later the New York Times observed that for bewildered Americans who saw oil plumes rising, livelihoods crumbling and seabirds dying in the viscous crude, Hayward came to personify the catastrophe.</p>
<p>The starkly different outcomes of the two incidents could be put down to failure of corporate memory. To a rigidly hierarchical executive style which was acknowledged to exist at BP Headquarters. Or to over-dependence on a single spokesperson who was ill-suited to the task of conveying compassion and conviction. Whatever the cause, BP’s Gulf of Mexico oil spill has well and truly earned its place in the pantheon of bona fide PR disasters. And it’s a brutal warning that the impact of bad management can persist for decades. </p>
<p>But perhaps most importantly, it’s a reminder that individual managers set the tone in a crisis. Even after 25 years, there is much more to be learned from the little-known success of James Ross of BP in 1990 than can ever be gained from raking over the much studied disaster of BP and Tony Hayward in 2010.</p>
<p><em>This is part of an ongoing series on ‘bad’ management. Read more in the series <a href="https://theconversation.com/au/topics/bad-management">here</a>.</em></p><img src="https://counter.theconversation.com/content/40307/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tony Jaques does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Before the 2010 Deepwater Horizon oil spill in the Gulf of Mexico, BP had previously gained high praise for its treatment of a similar spill.Tony Jaques, Senior Research Associate, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/372382015-02-11T06:22:15Z2015-02-11T06:22:15ZArts institutions must break their petroleum dependency<figure><img src="https://images.theconversation.com/files/71618/original/image-20150210-24682-h5fhuj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Concerns about art and the environment should not be so divorced.</span> <span class="attribution"><span class="source">Lucy Orta</span></span></figcaption></figure><p>After a three-year court battle, the Tate has been forced to disclose how much money it receives in sponsorship from BP. The stubbornness seemed to indicate a massive sum, one the galleries could not do without. So there was widespread surprise when it was discovered that the contribution BP makes to the Tate’s overall annual funding budget is <a href="http://platformlondon.org/2015/01/27/tate-reveals-bp-sponsorship-secrets-foi/">only 0.5%</a>. From 1990-2006, the figures ranged between £150,000 and £330,000 each year.</p>
<p>Of major global corporations, BP is the <a href="http://www.theguardian.com/environment/interactive/2013/nov/20/which-fossil-fuel-companies-responsible-climate-change-interactive">third-largest contributor</a> to climate change through the extraction of fossil fuels. The company has single-handedly caused 2.47% of human-caused emissions over the last 200 years.</p>
<p>So why do the Tate, the Royal Opera House, the National Gallery and the British Museum continue to accept such funding for such little return? In activist jargon this is called “art washing”: the attempt by these companies to improve their public image through cultural sponsorship.</p>
<p>A <a href="http://www.roh.org.uk/news/bp-and-royal-opera-house-announce-funding-extension">statement</a> issued by the CEO of the Royal Opera House praises the audience outreach and development which has brought opera to tens of thousands of new people. And the Tate proudly publicises the support BP has given to a greater access to the collections through exhibitions and educational programs. </p>
<p>But they fail to engage with the ethical issues of taking such money by claiming that taking moral stances lies beyond their role. </p>
<p>But it is precisely because it is impossible to compare the benefits of culture with the destruction that fossil fuels are wreaking on the environment that arts organisations should steer well clear of such money.</p>
<h2>Ethical funding</h2>
<p>There is a growing resistance movement and mounting international pressure on public institutions to divest and find an alternative to fossil fuel sponsorship. Some organisations are developing standards to be met. The Live Art Development Agency (<a href="http://www.thisisliveart.co.uk/uploads/documents/ethical_funding_policy.pdf">LADA</a>) has a clear Ethical Funding Policy, and provides a good blueprint for others to follow. It will not accept funding from companies or organisations which:</p>
<blockquote>
<p>Directly block or actively work against social justice; whose activities directly harm the environment; or who directly block or work against community empowerment. </p>
</blockquote>
<p>I have read arguments pertaining to BP’s high corporate ethical standards, which somehow whitewash all its other controversial activities. But no matter how you paint it, there’s no avoiding <a href="http://www.greenpeace.org.uk/files/tarsands/tar-sands.html">BP’s ravaging</a> of the boreal forests of Alberta, or the human and environmental tragedies of the Gulf of Mexico – the worst accidental oil spill in the history of the petroleum industry, which resulted in the <a href="http://www.telegraph.co.uk/finance/newsbysector/epic/bpdot/9680668/BP-agrees-record-4.5bn-settlement-over-Gulf-spill.html">largest criminal resolution</a> in US history. All these episodes constitute a dangerous threat to our society and planet. </p>
<p>Out of the ten immoral areas of activity on LADA’s list, BP ticks eight of the sin boxes. It is difficult to understand why and how popular and “ethical” artists like Jeremy Deller, who sat on the Tate Board of Trustees, accept <a href="http://www.theguardian.com/artanddesign/2015/jan/26/tate-reveal-bp-sponsorship-150000-330000-platform-information-tribunal">the Tate’s declaration</a> that “taking a moral stance on the ethics of the oil and gas industry remains outside of Tate’s charitable objectives”.</p>
<h2>‘Apartheid-style boycott’</h2>
<p><a href="http://www.theguardian.com/commentisfree/2014/apr/10/divest-fossil-fuels-climate-change-keystone-xl">Desmond Tutu wrote</a> last year: “We need an apartheid-style boycott to save the planet.” He went on to say that it’s time for “people with conscience” to cut the funding umbilical cords that are poisoning the reputations of publicly funded educational and cultural institutions. We desperately need more key figures to speak out – clearly the voices of these people are the ones we hear.</p>
<p>Thankfully, as Tutu goes on to say, the fossil fuel divestment is the “fastest-growing corporate campaign of its kind in history”. The wave of resistance includes organisations such as the World Council of Churches, the British Medical Association, the Rockefeller Foundation, the Glasgow School of Art, Lego and the Southbank Centre.</p>
<p>Hopefully the Tate’s trustees will soon follow suit. In accepting this funding, the sixth most visited art museum in the world is implicitly supporting BP.</p>
<p>The <a href="http://www.bp.com/en/global/corporate/about-bp/bp-worldwide/bp-united-kingdom/bp-in-the-community/arts-and-culture.html">British Museum and National Gallery</a> will also have to make ethical, social and environmental decisions about the money they receive. Alongside all the alternative avenues of ethical funding available, it would take just 50p per visitor to each of the three world-class museums to raise more than £8m in revenue, which is how much these museums will receive from their sponsorship deals with BP between now and 2017.</p>
<p>This is not a campaign to drop free entry to art galleries and museums. But 50p per visitor is not much in the grand scheme of things, particularly considering the emerging resilience of crowdfunding innovation. The growing ethical consciousness amongst some select arts institutions and the increasing grassroots resistance to a world beyond petroleum dependency means that such a world is now well within reach. It’s time for the big museums to realise this.</p><img src="https://counter.theconversation.com/content/37238/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lucy Orta does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>After a three-year court battle, the Tate has been forced to disclose how much money it receives in sponsorship from BP. The stubbornness seemed to indicate a massive sum, one the galleries could not do…Lucy Orta, Chair of Art in the Environment, University of the Arts LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/254712014-04-18T10:03:00Z2014-04-18T10:03:00ZDeepwater Horizon: four years on and offshore safety remains questionable<p>Easter Sunday will mark the fourth anniversary of the <a href="http://www.theguardian.com/environment/bp-oil-spill">BP oil well blowout</a> in the deep waters of the Gulf of Mexico. Eleven workers on the Deepwater Horizon drilling platform died and almost five million barrels of oil poured into the Gulf from the Macondo well for 87 days. </p>
<p>Yet the worst environmental disaster in US history failed to trigger any changes by the US Congress in safety or environmental laws offshore. Drilling activity in the gulf today surpasses that in April 2010. It is time to ask: is drilling in the Gulf any safer now than it was before the disaster?</p>
<p>The question calls to mind the quip of a popular Russian comedian after the fall of the Soviet Union: “Much has changed, but nothing has happened. Or is it that much has happened but nothing has changed?”</p>
<p>Much has certainly happened. New entities, and acronyms, exist, some created literally overnight in the wake of the disaster: <a href="http://www.bsee.gov/About-BSEE/index/">BSEE</a>, <a href="http://www.boem.gov/uploadedFiles/BOEMfactsheet.pdf">BOEM</a>, <a href="http://www.centerforoffshoresafety.org/">COS</a>, <a href="http://marinewellcontainment.com/">MWCC</a>, and a just-born <a href="http://www.bsee.gov/BSEE-Newsroom/BSEE-Fact-Sheet/FACT-SHEET--Ocean-Energy-Safety-Institue/">OESI</a> now dot the landscape.</p>
<p>And we have certainly seen a tsunami of innovation. There are new capping stacks for subsea intervention and containment, better blowout preventers tested in better labs, better clean-up techniques, advanced drones and sensors to monitor underwater conditions in real-time, and better algorithms in software programs. Operators can now bring pre-positioned capping stacks to the scene of a blowout in days, not weeks. BP can pack a containment device into seven large planes and fly it anywhere in the world.</p>
<p>There has also been a painful recognition that complacency is negligence. Industry and government both assumed that because no Deepwater Horizon-style disaster had previously occurred in the Gulf, all was fine. Yet, this very complacency is a root cause of accidents, as experts in safety management know. After a frightening event, stronger safety controls are heeded for a time, but then time dims the memory and corners are cut without obvious consequences. Complacency sets in and the system drifts into an unsafe state. A major role for the offshore regulator is to prevent this drift.</p>
<p>And we finally saw the adoption of a Safety and Environmental Management System (SEMS) requirement as a new regulation offshore, after industry lobbying had previously delayed its arrival. The SEMS rule is the mechanism to prevent workers and management from becoming complacent. It institutionalises the planning, procedures and training that keep safety always in mind.</p>
<h2>Who audits the auditor’s auditor?</h2>
<p>Much has happened, indeed. But has there been real change so that offshore operations in the Gulf are genuinely safer? For a start, the US regime does not require that operators’ safety plans be approved by the new regulator, the Bureau of Safety and Environmental Enforcement (BSEE), before the operator receives a permit to drill. And the regulator is not an independent agency free from the politics which plagued its predecessor. Without an effective regulator that can check whether companies are sticking to their safety plans, the regime seems to be nothing more than prescriptive paperwork that must be shown to the regulator on demand, if it asks.</p>
<p>The offshore regulator is now two-and-a-half years old, with safety as its primary focus. Its predecessor agency was starved of funds for years while operators pushed the offshore frontier into deep water, and the new bureau too lacks the experienced, professional and technical staff it needs to oversee offshore operations. Its own website acknowledges that the agency must undergo a total human capital transformation before it can perform its tasks adequately.</p>
<p>This means that in many ways, the leading role in new safety measures in the Gulf has been taken by the Center for Offshore Safety (COS), a body created by the large operators in the Gulf in early 2011. Its stated mission is to “promote the highest level of safety” for offshore operations through “leadership and effective management systems”. The body is part of the <a href="http://www.api.org/">API petroleum industry trade association</a>, which also, of course, lobbies for lower taxes and less regulation.</p>
<p>The Center for Offshore Safety aims to improve the industry’s safety record by helping members develop those new safety programs and by building a process for auditors to rigorously assess them. The theory is that well-trained third-party auditors will spot bad performers and the industry will be protected against a “rogue” company whose sloppy safety practices could lead to another disaster – and more drilling bans.</p>
<p>The COS will also analyse aggregated audit data to see where its members are having the most problems conforming to new requirements and can also use the data to benchmark the safety performance of its members. It is worth noting that the data and analysis are the property of the industry association and may not be released to the public without its approval.</p>
<p>James Watson, the first director of the government regulatory bureau, characterised this new offshore safety regime as “an operator-driven safety program with BSEE oversight”. And it is true that the auditing system in use in the US today is almost wholly a construct of the offshore industry itself. The Center for Offshore Safety has been and still is the dominant player in raising safety standards offshore. The regulator’s only formal link to the center is that it “approves” it to accredit the third-party auditors, the companies which perform offshore safety audits for operators, much like Ernst & Young performs financial audits for clients.</p>
<p>In other words, the regulatory framework looks like “industry self-regulation through third-party audits”. The system can be simultaneously criticised for allowing too much industry self-regulation and for allowing operators to outsource their safety audits to third-party consultants rather than developing their own capability to do it alongside an embedded safety culture.</p>
<h2>Steep learning curve</h2>
<p>The toddler-aged government regulator does not pay for the audits and does not have to hire or retrain personnel to conduct them. This leaves the Bureau of Safety and Environmental Enforcement outside the “learning loop”. Its employees will not gain expertise in understanding the industry’s problems and how the regulations work in practice. Clearly, to earn public confidence in this system, the bureau must learn to “audit the auditor’s auditor”, that is, to audit how COS is auditing the third-party audit service companies that COS accredits after BSEE has accredited COS. (Did you get that?)</p>
<p>That’s not to say their interests aren’t aligned. Suppose an offshore deepwater operator receives a prized safety certificate from the industry-run Center for Offshore Safety as a sort of “Good Housekeeping Seal of Approval”. Suppose, then, that this operator suffers an incident like the Deepwater Horizon blowout. Will the COS be in the hot seat at Congressional hearings as the dominant player in the offshore safety regime? Or will the government bureau be faulted as having allowed regulation to be outsourced to the industry’s own body and to third-party companies? Both are at risk.</p>
<p>It will clearly take a number of years for the new bureau to be an effective regulator. And there are some critical tasks that it must learn to meet the standards of experienced UK and Norwegian regulators in the North Sea. It has been given a “trusted agent” to advise it in its tasks. Meet the just-born OESI, the Offshore Energy Safety Institute. It is a consortium of three universities (including the University of Houston) whose academic experts can help the regulator learn a host of tasks, including becoming a data-rich agency with the ability to crunch the numbers, spot trends and assess risk.</p>
<p>Until the regulator can do this, and report it to the public, we cannot know whether the Gulf of Mexico is really safer in the coming years as massive BP spill fades from memory.</p>
<p>An under-resourced regulator is not a trivial safety risk for industry. The <a href="http://www.ogp.org.uk/">European trade association</a> (OGP) has warned its members that if a regulator is not providing robust oversight, then: </p>
<blockquote>
<p>An important piece of the technical assurance process may be missing. This is a ‘weak signal’ that should lead the OGP member to carry out a more extensive self-audit to compensate for the lack of competent oversight.</p>
</blockquote>
<p>Message to US politicians and industry lobbyists: pay heed to the “weak signals” that you create when an anti-government ideology trumps sound regulation. A good regulator is industry’s best friend. And that is the ultimate lesson of the Deepwater Horizon, four years out.</p><img src="https://counter.theconversation.com/content/25471/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jacqueline Lang Weaver does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Easter Sunday will mark the fourth anniversary of the BP oil well blowout in the deep waters of the Gulf of Mexico. Eleven workers on the Deepwater Horizon drilling platform died and almost five million…Jacqueline Lang Weaver, A.A. White Professor of Law and Interim Director of the EENR Center, University of Houston Law CenterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/242992014-03-14T06:14:20Z2014-03-14T06:14:20ZScottish independence would complicate BP and Shell’s exit from the North Sea<figure><img src="https://images.theconversation.com/files/43854/original/gbyf9npw-1394716729.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Shell and BP bosses are raising fears about North Sea future in independent Scotland</span> <span class="attribution"><a class="source" href="http://www.flickr.com/photos/black_friction/2368687166/sizes/o/in/photolist-4Bj9aU-kYgxnA-cKrGZh-s8zYG-6HpMDu-dF5LFp-3xEhU-6Jmzu-6Jmzc-fh6vcx-6Jmyv-RuUTy-Gqp3V-RwrqP-dfTnR4-fAvxEi-bV142P-dfnVpp-hWKRtX-b8xPvk-5kVyL8-LK2G-98g6LH-kYf3Ki-72zFcj-7YUycy-5gDoCK-aFz31k-3N6y9S-3N6xUC-5kVLKz-6HPouy-bqUSUp-kqxc9j-kqxQq2-kqxbnF-kqxQDt-kqxacp-9pzc4k-kquThT-kquUyR-kqtqLt-kqu6UX-efMpis-7Zja6s-bF6E7P-62fwUq-Rx7u6-9TbwQj-9Tbwyu-9T8Hfa/">Nick Bramhall</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>The recent concerns raised by the chief executives of <a href="http://www.theguardian.com/business/2014/feb/04/bp-chief-bob-dudley-scotland-independence">BP</a> and <a href="http://www.bbc.co.uk/news/uk-scotland-scotland-politics-26461833">Shell</a>, Bob Dudley and Ben van Beurden, about a possible “yes” outcome in the Scottish referendum might seem a bit puzzling given their huge size and global reach. </p>
<p>Often called “super-majors”, they are more powerful and influential than the companies that traditionally dominated the oil markets many years ago. </p>
<p>With large-scale operations in Nigeria and Russia, both countries near the top of the <a href="http://www.transparency.org/research/cpi/overview">Corruption Perceptions Index</a> and notoriously difficult to do business in according to independent indicators, we might wonder what kind of Scotland these experienced CEOs see emerging in the near future that concerns them so much they need to share their worries with us. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/43856/original/6m7cmxp7-1394716890.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/43856/original/6m7cmxp7-1394716890.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/43856/original/6m7cmxp7-1394716890.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=375&fit=crop&dpr=1 600w, https://images.theconversation.com/files/43856/original/6m7cmxp7-1394716890.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=375&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/43856/original/6m7cmxp7-1394716890.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=375&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/43856/original/6m7cmxp7-1394716890.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=471&fit=crop&dpr=1 754w, https://images.theconversation.com/files/43856/original/6m7cmxp7-1394716890.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=471&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/43856/original/6m7cmxp7-1394716890.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=471&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Shell boss Ben van Beurden is latest to sound the alarm over a yes vote.</span>
<span class="attribution"><a class="source" href="http://www.flickr.com/photos/royaldutchshell/11710195956/sizes/k/in/photolist-iQMPhh/">Shell</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>Expectations of the future are part of the economic modelling that most businesses typically do, and because of the referendum they now have to factor in some additional uncertainty. But for an international company with most of its operations outside of the UK North Sea, why should it matter? </p>
<p>There is an answer and an issue here. The answer lies in the kind of industry that oil has become. These days there are scores of companies with an appetite for risk operating in well over a hundred countries around the world. Political risk is way down their list of concerns, long after rising costs.</p>
<h2>Modern oil exploration</h2>
<p>The former head of BP, Tony Hayward, is currently leading his new company into Somaliland in East Africa, a secessionist statelet, in which the exploration rights are somewhat uncertain. Bob Dudley had several challenging years at the head of the company’s Russian operation, TNK-BP. Many other oil companies have taken significant risks in Africa in recent years and essentially opened up East Africa to the oil business. </p>
<p>Why might they worry about the Scots doing a Braveheart? The short answer is probably that in all of these international operations it helps to have a relatively strong home state to call on to promote your interests on the international stage from time to time. The UK just about fits the role; an independent Scotland would be less convincing. </p>
<p>Closer to home, the recent <a href="http://www.woodreview.co.uk/">Wood Review</a> demonstrates how progress in the UK North Sea will require a completely different approach to regulation to ensure that the economics remain attractive to investors no matter what the outcome of the September vote. Change has to happen if we are to recover much of what is left (and for commercial reasons, oil companies tend to leave a lot in the ground).</p>
<p>The report, whose proposals are largely being backed by the government, is essentially saying that cooperation between government and industry is the order of the day. It wants a new regulatory body set up to ensure that developments are timed and costs are shared so that space is left for a substantial tax take.</p>
<h2>What yes means for North Sea reform</h2>
<p>If the vote is yes in September, the new regime is going to be a lot more complicated to develop. How is tax relief on new infrastructure going to be implemented when two jurisdictions are “working together”, for instance?</p>
<p>And what about the need to remove ageing platforms from the North Sea?
The UK government is currently working out a scheme to address tax relief on decommissioning. Companies must be concerned that whatever emerges will be a scheme that any new Scottish government might be less enthusiastic to sign up to, still less to take over. </p>
<p>So there is an issue: what kind of regulatory system can be developed for the North Sea’s next phase that meets investors’ expectations and needs but fits into the emerging new governance structure? In this area of our economy, change seems to be inevitable if we are to maximise our resources. It will be a source of uncertainties. </p>
<p>Yet for the largest companies the concerns are likely to be different – and this may be the real trigger for the statements from our BP and Shell CEOs. The North Sea is a mature province. For these companies its best years are in the past. </p>
<p>It makes more sense to sell out to new investors, to smaller companies with lower costs. The impending regulatory changes are likely to make the business of find an eager buyer for their North Sea assets a challenging one. But finding a buyer in the current political climate is likely to be even more so. </p><img src="https://counter.theconversation.com/content/24299/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Cameron has received funding from the EU and The World Bank.</span></em></p>The recent concerns raised by the chief executives of BP and Shell, Bob Dudley and Ben van Beurden, about a possible “yes” outcome in the Scottish referendum might seem a bit puzzling given their huge…Peter Cameron, Professor of International Energy Law and Policy, University of DundeeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/187362013-09-30T20:34:48Z2013-09-30T20:34:48ZBuried treasure: finding safer ways to tap into oil and gas from our oceans<figure><img src="https://images.theconversation.com/files/32134/original/ddstk9j8-1380510460.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">An oil and gas drilling platform offshore from Australia.</span> <span class="attribution"><span class="source">CSIRO</span></span></figcaption></figure><p>If anything good is to come from the devastation caused by the Deepwater Horizon oil spill in the Gulf of Mexico and Australia’s Montara oil and gas leak the year before, it is that we learn from our mistakes.</p>
<p>It’s now more than three years since the April 2010 explosion and oil spill at the BP drilling rig in the Gulf of Mexico, considered the world’s largest marine oil spill. Its effects are still being felt today - and there is still too much that we don’t yet know about its long-term costs.</p>
<p>That’s the challenge for scientists, the oil and gas industry and others: to develop better ways to safely tap into the wealth of our oceans to meet huge global demand for oil and gas, while still protecting our marine habitat and the communities who depend on it.</p>
<h2>Witness to a disaster</h2>
<p>As a scientist involved in the development and application of oil spill counter-measures, back in 2010 I was asked by US Government agencies to assist in the oil spill response in the Gulf.</p>
<p>While working with a science team to monitor the effectiveness and potential environmental impacts of the clean-up, I witnessed how the spill affected the region’s environment and some of the surrounding local communities.</p>
<p>As a result of this firsthand experience, I was asked to serve on the US National Research Council Committee that was asked by Congress to examine the broader environmental, economic and social impacts of the Gulf spill.</p>
<p><a href="http://www.nap.edu/catalog.php?record_id=18387">Our report</a> found that the US government could not fully account for <a href="http://www.theguardian.com/environment/2013/jul/11/us-assessment-bp-oil-spill-damage">the true costs</a> of the disaster using current methods.</p>
<p>We found there is a substantial gap in our understanding of the social and economic impacts of the oil spill on the multiple uses of the Gulf, such as for tourism and fisheries. </p>
<p>Our study also highlighted the limits in our knowledge about processes in the deep sea ecosystem, such as nutrient recycling and microbial degradation of oil, which could influence the level of productivity of the ocean.</p>
<h2>Oil and gas in Australia</h2>
<p>The US isn’t the only place we can learn from. Closer to home, four years after Australia’s worst oil and gas leak at the Montara station in the Timor Sea off the coast of Western Australia, the station <a href="http://www.au.pttep.com/news/2013/june/oil-production-begins-from-pttep-aa's-montara-field">resumed production in June this year</a>. </p>
<p>There has been a transformation of its management culture, operational capabilities, safety processes and environmental systems. PTTEP Australasia (the operators of the Montara station) said that the changes were all validated by <a href="http://www.montarainquiry.gov.au/">five independent reviews</a> commissioned by the Australian Government.</p>
<p>Learning lessons from such experiences is more important than ever, given that oil and gas remain a critical part in Australia’s future energy needs. </p>
<p>Domestic demand for oil is expected to remain fairly constant through to 2035, with imports likely to triple. By 2035, Australia’s gas production is expected to quadruple and by the end of this decade, Australia may rival Qatar as the world’s largest exporter of liquid natural gas (LNG).</p>
<p>Despite the vast majority of our oil currently coming from offshore Australia, our nation’s deep sea remains relatively unexplored and there is significant potential for new resources to be found in deepwater frontier basins, such as in the Great Australian Bight.</p>
<p>In the last few months alone, 13 new offshore petroleum exploration permits have been granted for the Indian Ocean off the coast of Western Australia, as well as offshore from Tasmania.</p>
<h2>Plugging gaps in our knowledge</h2>
<p>Research collaborations with industry, government agencies and academia provide the essential scientific information required for ecosystem-based management decisions that allow society to benefit from its commercial activities, while protecting our marine habitat and the life within it.</p>
<p>It is vital that we look at impacts across the full life-cycle of offshore energy activities. For example, many people don’t realise that oil and gas production produces operational waste during its day-to-day operations. We want to know the long-term effects on the environment from this waste.</p>
<p>Of course, we need good processes to quickly assess and reduce environmental damage when oil spills occur. But we also need to take a bigger picture approach, so that we better understand the wider economic and social impacts of spills, and of oil and gas activities in general.</p>
<p>Our nation’s quest for energy is of economic, social and environmental significance and we need to ensure we have the best available information to inform decision-makers in industry, regulation and government. </p>
<p>Reliable socio-economic and environmental assessments are needed for better informed decisions on applications for offshore oil and gas operations. Such assessments can also serve as a baseline for the guidance of spill response operations and subsequent damage assessments, if a spill ever occurs.</p>
<p>By conducting <a href="http://www.csiro.au/en/Organisation-Structure/Flagships/Wealth-from-Oceans-Flagship/Great-Australian-Bight/Research-programs.aspx">whole-of-ecosystem studies</a> that examine everything from the sea floor to the ecology of our ocean’s top predators, we can establish benchmarks so that, if environmental damage does occur, we know what the healthy ecosystem looked like and have the knowledge to eventually return it to its original state.</p>
<h2>Strengthening ties with industry</h2>
<p>Originally from Canada, I now call Perth home after my recent appointment as Director of CSIRO’s Wealth from Oceans National Research Flagship. Australia’s national science agency has a long-standing relationship with the oil and gas industry. The <a href="http://www.csiro.au/Organisation-Structure/Flagships/Wealth-from-Oceans-Flagship.aspx">Wealth from Oceans Flagship</a> intends to strengthen its collaboration with industry even further.</p>
<p>In the past, industry-research partnerships traditionally focused on improving production technologies and solutions. However, our focus for oil and gas research now includes environmental, economic and social factors, including risk assessments for regulatory approval, exploration, production, transportation, decommissioning, and emergency response to spills and mitigation.</p>
<p>In April this year, a team of scientists from CSIRO, the South Australian Research and Development Institute (SARDI) and the University of Tennessee returned from a <a href="http://csironewsblog.com/2013/06/18/take-a-bite-at-the-bight-and-its-deep-ocean-ecosystem/">research voyage to the Great Australian Bight</a>. BP Developments Australia has been granted exploration rights in the Bight and is now collaborating with CSIRO, SARDI, University of Adelaide and Flinders University to conduct one of only a few whole-of-ecosystem studies ever undertaken in Australia.</p>
<p>This <a href="http://www.csiro.au/Organisation-Structure/Flagships/Wealth-from-Oceans-Flagship/Great-Australian-Bight.aspx">four-year, $20 million collaboration</a> will examine the oceanography, ecology, and geochemistry of the Bight. It will also conduct socio-economic research on communities and businesses dependent on the Bight to ensure the future developments co-exist with the area’s environment, industries and the community.</p>
<p>Successful collaborations can benefit the bottom-line and the environment. In 2012 Petronas and CSIRO launched <a href="http://www.csiro.au/Organisation-Structure/Divisions/Earth-Science--Resource-Engineering/PIPEASSURE.aspx">Pipeassure</a>, a material used to protect pipelines against corrosion in harsh marine environments. This product, now commercially available, offers considerable benefits over conventional repair technologies and reduces production downtimes, benefiting both the operating company and the environment.</p>
<p>Balancing our need for offshore oil and gas while minimising the legacy of environmental impact on our marine life is a major challenge worldwide. My goal is for Australia to be a leader in setting standards for environmental protection, as well as in developing technology and training experts, ready to work in a globalised industry.</p><img src="https://counter.theconversation.com/content/18736/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>CSIRO has co-funded research projects with industry, including a project with BP as mentioned in article.</span></em></p>If anything good is to come from the devastation caused by the Deepwater Horizon oil spill in the Gulf of Mexico and Australia’s Montara oil and gas leak the year before, it is that we learn from our mistakes…Kenneth Lee, Director, Wealth from Oceans national research flagship, CSIROLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/156352013-07-02T05:54:02Z2013-07-02T05:54:02ZThe oil industry has yet to learn lessons of Piper Alpha<figure><img src="https://images.theconversation.com/files/26511/original/mmm2fv6y-1372591225.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The offshore industry need not be so dangerous if safety is put first.</span> <span class="attribution"><span class="source">PA</span></span></figcaption></figure><p>The explosions and fire that completely destroyed the North Sea oil rig Piper Alpha and cost 167 workers their lives remains the world’s worst offshore oil disaster. Saturday, July 6, marks <a href="http://news.stv.tv/north/229751-health-and-safety-to-mark-25th-anniversary-of-piper-alpha-disaster/">25 years</a> since the disaster in 1988.</p>
<p>The resulting public inquiry under judge Lord Cullen was to be the bible for renovating offshore safety worldwide, yet there have been many subsequent accidents since. The recent review into the <a href="http://news.bbc.co.uk/1/hi/world/americas/8634874.stm">Deepwater Horizon</a> oil rig fire in 2010 which killed eleven offshore workers and spilt nearly five million barrels of oil into the Gulf of Mexico conjures an overpowering sense of déjà vu. There is a feeling that, once more, the loss of life was preventable.</p>
<p>Again, there is the same lethal cocktail of contingent circumstances and systemic underlying causes; multiple safety systems that did not function at the crucial moments, managerial failures immediately before and during the unfolding disaster, organisational failures embedded in distorted information flows and a lack of coherent safety management, defective regulatory authorities with contradictory responsibilities for both production and safety, and even the outright “capture” of regulatory processes by the industry itself.</p>
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<p>Yesterday the North Sea, today the Gulf of Mexico, tomorrow some remote province in a compliant developing state? The same common thread continues seemingly unchecked. It is as if the “offshore” in offshore oil is emblematic of more than simply spatial separation, but instead represents something akin to a zone of exclusion, beyond the horizon of effective oversight that we rely on government to exercise on our behalf as citizens.</p>
<p>Business schools now incorporate the Deepwater Horizon disaster into their classic <a href="http://www.hbs.edu/faculty/Pages/item.aspx?num=39501">case studies</a> of corporate responsibility failures and, in BP’s case, of belated corporate contrition. The US Justice Department meanwhile <a href="http://www.ft.com/cms/s/0/27327240-f6c9-11e1-827f-00144feabdc0.html#axzz2XoyEueKR">has indicted BP</a> for its “culture of corporate recklessness” amounting to “gross negligence and wilful misconduct”. It levied the <a href="http://online.wsj.com/article/SB10001424127887324556304578120140555122104.html">largest fine</a> in US criminal history and company personnel continue to face serious criminal charges including manslaughter. Regrettably, the owner of Piper Alpha, Occidental Petroleum, was not held accountable. One hopes that such impunity is no longer the norm.</p>
<p>However, the focus on BP and/or its partners Halliburton and Transocean obscures a more fundamental question. How could the safety regime in the US offshore oil industry have remained apparently impervious to the lessons of previous disasters? Were the safety standards on this rig so far below the prevailing norms in the industry? One suspects that many operators and contractors, as at the time of Piper Alpha, are today thankfully whispering in private “there but for fortune…”</p>
<p>That each disaster was avoidable is, in retrospect, a truism. That each was foreseeable is equally so, but we repeatedly find that workers in the industry had fears for their safety but lacked confidence to express their concerns without fear of retribution. Why has safety remained an intractable issue in the offshore oil industry? Even as Piper visibly burned, the failure of the linked Tartan platform to shut down its flow of oil and gas was illustrative of the paralysing effect of an industry mind-set that could not contemplate shutting down production, since the enormous losses entailed would surely bring career-ending consequences to the individual who took such a momentous decision. Today the talk is of safety first, production second, but it would need to be a brave person to hit that button.</p>
<p>The pioneering scholar of offshore safety, Professor WG Carson, spoke tellingly in his book “The Other Price of Britain’s Oil” of a “political economy of speed” that prioritised profits over safety. The same attitude – production first - is just as evident today. Seven out of nine key decisions adopted in the drilling operation that led inexorably to the Deepwater catastrophe were identified by the Presidential Commission report as dictated by the desire to “<a href="http://www.bbc.co.uk/news/world-us-canada-12124830">save time</a>”. The Commission identified “elevating the goal of expeditious… development above the requirements of safety and environmental protection”. But there is also the broader imperative driven by governments’ desire for lucrative oil revenues and the rapid exploitation of safe offshore oilfields.</p>
<p>Professor Carson identified what he called “institutionally tolerated non-compliance” of regulatory requirements. Weak regulators either turned a blind eye to violations, or simply shared the opinion that production trumps all other considerations. Carson predicted this would inevitably lead to a major safety failure in the North Sea - a decade before Piper Alpha was destroyed.</p>
<p>It seems that in key respects not much has changed. In the memorable, damning words of the <a href="http://templatelab.com/deepwater-report-to-the-president-final-report/">Presidential Commission</a>: “efforts to expand regulatory oversight, tighten safety requirements, and provide funding to equip regulators with the resources, personnel, and training needed to be effective were either overtly resisted or not supported by industry, members of Congress, and several administrations”.</p>
<p>Today, the lethal legacy of a long era of deregulation in the US that was exported worldwide continues to take its toll on workers’ lives, the environment and communities. Whether this unpalatable truth will ever be accepted among those with the power to enforce corporate accountability that would protect people first and profits second remains to be seen.</p>
<p>In the North Sea, regulatory reconstruction has produced a new safety regime. Its robustness has been constantly scrutinised and remains contested. There have been a number of <a href="http://www.dailymail.co.uk/news/article-2121457/North-Sea-gas-leak-threatens-repeat-Piper-Alpha-oil-rig-disaster-Aberdeen.html">near-Piper Alphas</a> which only luck prevented from becoming full-scale disasters. The hope is that the post-disaster reconstruction of the US regulatory regime will produce effective root-and-branch reform. Close observers remain less than sanguine. Appalling though it may be to contemplate, until public policy-makers and governments show sufficient resolve in confronting the power of the multinationals which dominate the industry, and until the lessons of previous preventable disasters are learned, there will be the potential for many more human tragedies.</p>
<p>While nothing in this industry may ever match the enormity of Piper Alpha and the legacy of suffering it bestowed, each and every life lost in the course of daily work is unacceptable. Accidents don’t just happen, even in a dangerous and risk-laden industry. Accidents are the outcome of a pattern of corporate managerial mis-behaviours which in principle need not have occurred had the proper incentives and procedures been in place.</p>
<p>Ultimately, the lesson of corporate failure is that management must bear the responsibility for managing in a safe and environmentally appropriate manner. This did not happen in the case of Piper Alpha and it would appear from Deepwater Horizon that some industry management is still reluctant to live up to its obligations.</p>
<p><em>This is an edited version of an article that first appeared in the July edition of Safety Management magazine</em></p><img src="https://counter.theconversation.com/content/15635/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Woolfson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The explosions and fire that completely destroyed the North Sea oil rig Piper Alpha and cost 167 workers their lives remains the world’s worst offshore oil disaster. Saturday, July 6, marks 25 years since…Charles Woolfson, Professor of labour studies, Linköping UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/143662013-05-20T15:28:26Z2013-05-20T15:28:26ZOil, the marketing wolf pack, and EU price-fixing<figure><img src="https://images.theconversation.com/files/24146/original/vkv3n4sn-1369054714.jpg?ixlib=rb-1.1.0&rect=1426%2C340%2C2495%2C2002&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Shell and BP in less competitive times</span> <span class="attribution"><span class="source">flikr/recursion_see_recursion</span></span></figcaption></figure><p>When most of us think of cartels, we think of Colombian drug gangs rather than multi-national businesses. But not any more; if European regulators are to be believed, a cartel has been operating much closer to home.</p>
<p>Last week saw a <a href="http://www.bbc.co.uk/news/business-22530379">series of raids</a> on the corporate offices of Royal Dutch Shell, BP, and Norway’s Statoil by the European Directorate-General for Competition (or “DG Comp” as it is more commonly known). All companies involved have stated they are fully co-operating with the investigation.</p>
<p>These oil giants are suspected of “fixing prices” in the market for petrol, which may have resulted in retail prices being <a href="http://www.bbc.co.uk/news/business-22533993">artificially increased</a> across Europe. </p>
<p>This also comes as something of a revelation to many as The Office of Fair Trading reported in January that the <a href="http://www.oft.gov.uk/news-and-updates/press/2013/12-13#.UZoG7it4anY">UK fuel market operated fairly</a>, and that competition was effective in the sector, with major supermarkets helping to drive down UK fuel prices. </p>
<p>So if even national competition regulators are failing to spot cartels, then how many are currently operating? And who tends to be involved in their operation? The answer is surprising.</p>
<h2>An international problem</h2>
<p><a href="http://ec.europa.eu/competition/cartels/overview/index_en.html">Price-fixing behaviour</a> refers to a group of dominant firms agreeing the prices they will charge customers in a certain country. The recent alleged cartel between oil firms has made the headlines due to the high cost of fuel in the UK, and worries over fuel poverty. But such behaviour by major corporations is by no means a new phenomenon in the UK or the EU. </p>
<p>Since 1990, approximately <a href="http://ec.europa.eu/competition/cartels/cases/cases.html">100 cases</a> of pan-European price fixing cartels have been identified in the EU. Industries as diverse as banana supplies, vitamins and cement have seen cartels, involving some of Europe’s largest corporations.</p>
<p>It is estimated that cartels of this type have affected in excess of <a href="http://ageconsearch.umn.edu/bitstream/28610/1/sp04-15.pdf">$400 billion of trade</a> in countries in North America and the EU since the 1990s, distorting and harming free-market competition. In some markets, the economic impact of cartels has resulted in artificial price <a href="http://www.agecon.purdue.edu/staff/connor/papers/effectiveness_antitrust_sanctions_ghosal.pdf">increases of up to 25%</a> on what customers would normally expect to pay for some products. </p>
<p>Industries such as oil are ripe for potential price-fixing as they typically involve a small number of dominant firms with high market shares, making agreements easier to co-ordinate than in more fragmented markets. </p>
<h2>Fluffy fixers?</h2>
<p>It is unclear, however, who exactly in Royal Dutch Shell, BP, and Statoil may have been involved with any price-fixing, and party to any agreements.</p>
<p><a href="http://competitionpolicy.ac.uk/documents/107435/107589/ccp_press_release_regulatory_perception_of_marketing_function_220107.pdf">Research</a> on anti-competitive practices through history reveals an unlikely source of price-fixing: marketers.</p>
<p>This might seem surprising as the popular perception of marketers is of “fluffy folk” who spend their time largely devising advertising campaigns. But evidence in two recent studies shows something quite different. </p>
<p>In one study, using data collected between 1950 and 2007, John Ashton and I found that <a href="http://www.uea.ac.uk/polopoly_fs/1.106431!ccp09-2.pdf">marketers were involved</a> in approximately half of all anti-competitive acts investigated by the UK regulator the Competition Commission. Similarly, a study we are currently developing has found that marketing and sales managers may be involved in more than <a href="http://competitionpolicy.ac.uk/documents/107435/107587/12-11+Ashton+Pressey+Cartels+v3.pdf/2e54180e-2bbe-4537-845f-aee1a049079a">40% of price-fixing cartels</a> in the EU between 1990 and 2009, along with other senior managers.</p>
<p>The majority of marketing executives, like most executives in general, behave ethically and abide by competition laws. There is certainly no suggestion that marketing officials at BP, Shell or Statoil have been involved in price-fixing.</p>
<p>However, it would seem that throughout Europe a small minority of marketing managers are not abiding by competition law. Why should this be the case?</p>
<h2>Wolf-pack brokers</h2>
<p>In his book, <a href="http://www.amazon.co.uk/Cheats-Work-Anthropology-Workplace-Crime/dp/0043011519">Cheats at Work</a>, sociologist Gerald Mars speculates that corporate crimes involving the co-operation of multiple individuals (or “team crimes”) are more likely to involve sales and marketing personnel – described as “wolf-pack” jobs. </p>
<p>Marketing and sales managers possess certain skills that allow them to act as potential cartel “brokers”. Most notably, they know about prices and costs across markets, and they are experts in the assembly and use of market and competitor intelligence. </p>
<p>Of course, it may also be the case that they are effective scapegoats for the transgressions of more senior managers. Clearly we do not know if this was the case in any potential illegal activity in the oil market, or if the so-called wolf pack was involved.</p>
<h2>Huge fines</h2>
<p>Major investigations into alleged cartels can take 12 to 18 months until a decision is reached. What we do know is that penalties for breaches of competition law are increasing. A recent EU-wide cartel in the market for TV and computer monitor tubes, saw manufacturers <a href="http://www.guardian.co.uk/business/2012/dec/06/samsung-philips-panasonic-record-cartel-fine">fined £1.2 billion</a> for participating in two price-fixing cartels that existed for a decade, involving major electronics firms such as Samsung, Philips, and Panasonic.</p>
<p>If found guilty of artificially raising prices, the EU could impose a fine of up to <a href="http://ec.europa.eu/competition/cartels/overview/factsheet_fines_en.pdf">10% of a company’s annual global turnover</a> – huge sums in the oil industry.</p>
<p>Price-fixing cartels are most likely to form during <a href="http://europa.eu/rapid/press-release_SPEECH-00-295_en.htm">adverse market conditions</a>. Given current UK economic problems, and crises in many EU countries, we will most likely see more of these infringements by dominant companies. The extent to which the “wolf-pack” is involved remains to be seen.</p><img src="https://counter.theconversation.com/content/14366/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Pressey receives funding from ESRC Centre for Competition Policy.</span></em></p>When most of us think of cartels, we think of Colombian drug gangs rather than multi-national businesses. But not any more; if European regulators are to be believed, a cartel has been operating much closer…Andrew Pressey, Reader in Marketing, University of BirminghamLicensed as Creative Commons – attribution, no derivatives.