‘We’re stamp-collecting in exploration,’ Browne told Richard Hubbard, the company’s senior geologist. ‘We either make money or walk away.’ He reduced the number of countries where BP was exploring from 30 to 10, and sacked 7,000 employees. ‘We must focus only on elephants,’ he ordered. ‘It’s the New Geography,’ acknowledged David Jenkins, the head of technology. BP was heading for unexplored areas previously barred by physical and political barriers.
The new ventures included offshore sites in the Shetlands, the Gulf of Mexico, the Philippines and Vietnam. The most important risk was a 50 per cent stake in the search for oil under 200 metres of water at the Dostlug field in Azerbaijan, and a $200 million search at Cusiana, 16,000 feet up in the Colombian jungle. Colombia, Browne told analysts in New York during a slick presentation in 1993, was to be the hub of BP’s growth: ‘We estimate that the field contains up to five billion barrels of oil.’ His optimism was conditioned by self-interest, but would yield an unexpected benefit. Oil prices, David Simon predicted in 1992, would remain at $14 a barrel until 2000, half the 1983 price accounting for inflation. The Arab countries, Simon was convinced, would welcome BP back, ‘and we’ll get our hands on cheap oil’. While OPEC complained to the British government about North Sea production undercutting the Gulf’s prices, some OPEC countries, suffering reduced income, were reversing their hostility towards foreign investment. Production in Venezuela had fallen since the nationalisation of its oilfields in 1976. BP was invited to bid to return to over 10 fields, including the Pedernales field, abandoned in 1985. Browne’s excitement, compared to Shell’s cagey hesitation, gave BP the image of a well-oiled machine. Other decisions by Browne suggested the contrary. During his ‘good news’ speech in New York he declared that the tar sands had no future, investing in Russia was too risky, and BP would not invest in natural gas in Qatar because ‘the project will not provide a good return’.
Browne’s self-confidence was fed by the inexorable monthly rise of BP’s share price. Helped by cuts in the cost of refining and marketing, and in exploration from $4 billion in 1990 to $2.7 billion in 1994, and by the sale of $4.3 billion-worth of assets including 158 service stations in California, profits were rising – in one quarter by 92 per cent. The transformation of BP’s operation in Aberdeen from loss into profit sealed Browne’s reputation. Oil production had expanded in the North Sea, especially at the Leven field, and the company was certain to extract more oil from Alaskan fields newly acquired from Conoco and Chevron. Since the US preferred Alaska’s light sweet oil to Saudi Arabia’s sour oil, OPEC would suffer. ‘One swallow doesn’t make a summer,’ David Simon cautioned, conscious that oil prices were low and that BP still relied for its entire reserves on Alaska and the North Sea, both of which were nearing the peak of production. Nevertheless, it seemed that the struggle to recover was succeeding. Browne’s admirers spoke of his magic restoring a dog to its place as one of the world’s oil majors. In 1995 BP became the industry’s darling, overtaking Chevron, Mobil and Texaco with profits of $3 billion. Debt had been halved from $15.2 billion to $8.4 billion. ‘We’ve clawed our way back,’ cheered Simon, who in July 1995 became chairman, with Browne as chief executive. ‘We’ve put them through painful changes.’ Browne’s ambition to promote himself as a different kind of oil executive and BP as a changed company had triumphed beyond expectations.
Browne’s skill was to highlight his achievements and bury his failures. Several of his ambitious hunts for elephant oil reserves had produced ‘orphans’. In Colombia, the earlier focus of euphoria, the company had become embroiled in a public relations battle with a left-wing pressure group over BP’s involvement in a civil war, the narcotics business and a regime of terror waged by paramilitaries employed to protect BP’s 450-mile oil pipeline. The alleged victims were native farmers whose land had been portrayed in an orchestrated campaign as confiscated, their water reserves depleted and their livestock slaughtered. Worst of all, the oil wells were producing less than half what Browne had anticipated. After substantial criticism, BP would eventually compensate the farmers. BP’s rivals were suffering similar disappointments. On the basis of promising geology, Mobil had invested heavily in Peru. ‘I mean, this was classic,’ said Lou Noto, the company’s president. ‘This is the classic way of how to do it. Yet we came up with a dry well – $35 million later.’ Exxon had similar failures in Somalia, Mali, Tanzania, Mozambique, Nigeria, Chad and Morocco. Shell wasted money in Madagascar and Guatemala. Arco had wasted $163 million drilling 13 orphans in Alaska. Over the previous decade, about $14 billion had been dissipated in unsuccessful attempts to repeat the last big finds in the North Sea and Alaska. Those discoveries had cut OPEC’s share of the world’s oil production from 50 per cent in the 1970s to 30 per cent in 1985. In 1994, OPEC’s share rebounded to 43 per cent, while it retained 77 per cent of the world’s reserves. Shell fired 11,000 of its 106,000 worldwide workforce. In the same year, American production fell to 6.9 million barrels a day, the lowest since 1958, and the country became a permanent net importer of oil. With demand for oil rising, OPEC’s influence appeared certain to increase. Those statistics encouraged Browne in 1995, despite his earlier reservations, to seek opportunities in Russia.
Russia’s oil could replenish the oil majors’ reserves and counter OPEC’s influence. Despite the bribes and the gangsters, none of the oil chiefs jetting into Russia on their private jets from Texas and California hesitated to assert their indispensability in saving Russia from destitution, and US vice president Al Gore did not pause to consider the consequences of flying to Kazakhstan in December 1993 to encourage the country’s split from Russia, spiting the nationalists in Moscow and St Petersburg. On the contrary, causing anger among the Russians excited President Clinton and others in Washington. Russia’s debt crisis, declining oil production and political instability, they believed, presented an unmissable opportunity. With the US importing half its oil consumption, Clinton made the diversification of supplies a priority, and the Caspian could offer at least 200 billion barrels. To win the gamble, the politicians combined with BP’s John Browne, Exxon’s Lee Raymond and Ken Derr of Chevron to display utter indifference to Russia’s gradual collapse.
The introduction of democracy wrecked Russia’s oil industry. To secure political popularity in 1989 for ‘Glasnost’ and ‘Perestroika’ – openness and reform – Mikhail Gorbachev had diverted investment from industry to food and consumer goods. Blessed by reopened borders, free discussion in the media and the waning of the KGB, few in Moscow noticed the crumbling wreckage spreading across the oilfields in western Siberia, an area of 550,000 square miles, nearly the size of Alaska.
Finding oil in that region after the Second World War had been effortless. Gennady Bogomyakov, the first secretary of the Communist Party in Tyumen province, was famous during the 1950s for increasing production from the easiest and best fields ‘at any price’, regardless of the environmental cost or human welfare. In that plentiful region, Russia’s oil men were blessed with outstanding science, but cursed by problems they themselves caused – poor drilling, damaged reservoirs, neglected equipment and reckless oil spills. Instead of cleaning up the mess, wells were abandoned and the engineers moved on to new fields. Rather than halting the destruction, Gorbachev’s encouragement of a consumer revolution inflamed it. Overnight the flow of money from Moscow to pay for repairs and salaries and to drill new wells stopped. Angered by Moscow’s indifference to their deteriorating working conditions, poor housing and food shortages, the oil workers in 1990 began to produce less oil, the first decline since 1945. The relationships between companies in different regions also began to fracture. Oil companies in Siberia found difficulty in persuading factories in Azerbaijan to supply equipment, especially pumps; and some oilfields in Azerbaijan, the Caspian and western Siberia refused to supply crude oil to refineries.
After the disintegration of Soviet control over Eastern