Oil Majors Pumping Cash into Reinvention of Image

Times Online, UK

By Carl Mortished
December 24, 2005

IT’S energy without carbon emissions — almost — and BP is spending a mint telling us all about it.

BP is advertising its proposal to build a novel power plant in Scotland that will extract hydrogen from natural gas and use it to make electricity while it stuffs the residual carbon dioxide down an old North Sea oil well.

Carbon sequestration could cut 90 per cent of carbon dioxide emissions, BP claims, a figure that adorns a multimillion-dollar advertising campaign with the catch-line: “This time what we don’t produce is more important.”

What BP does not produce, it does not yet produce because Peterhead is still on the drawing board. There is an added cost in separating hydrogen from natural gas, so the project needs a subsidy and talks with the Government continue. Vivienne Cox, BP’s head of gas and renewables, says: “The project needs support.”

Could that explain why Peterhead features prominently in British ads? Might it encourage Gordon Brown, the Chancellor, to give such clever schemes a bit of a boost?

The BP image campaign kicked off at the end of November with the launch of BP Alternative Energy, a unit that will eventually house Peterhead as well as BP’s solar cell and nascent wind power businesses. However, a commitment to spend $8 billion (£4.6 billion) on renewables over the next decade was not enough to sway the Chancellor who a week later raised the tax on North Sea oil profits.

If not aimed at hard-nosed finance ministers, at whom are the ads addressed and what are they really saying?

One purpose is to stand out from the herd. In 2000 BP rebranded itself with the sunburst logo and tag-line “Beyond Petroleum”, aligning itself with consumer concern about green issues. BP was then ridiculed. Evironmentalists derided its “greenwash” and even Fortune magazine jeered: “Here’s a novel advertising strategy. Pitch your least important products and ignore your most important one.”

Five years later BP is having another go and investors are probably not the audience. Jon Rigby, an oil analyst at UBS, the investment bank, admits to being puzzled. “I am not sure how the campaign will help win over global investment institutions. I can’t work out why they are highlighting a relatively small part of their business,” he says.

BP is not alone in addressing issues that challenge its core activity. Chevron’s “Will you join us?” campaign broaches the sensitive subject of dwindling oil reserves in ads featuring letters signed by David O’Reilly, Chevron’s chairman. “It took us 125 years to use the first trillion barrels of oil. We’ll use the next trillion in 30,” he writes.

Matt Simmons, founder of Simmons & Co, the energy investment bank, is an internal critic of the oil industry, questioning the assumption that oil and gas output will carry on rising to meet demand. He doubts, however, that Chevron is a convert to the “peak oil” school of analysis, suggesting, instead, that the energy majors have been rattled by hurricanes, the apparent weakness of some oil infrastructure and a gathering political storm over oil profits. The massive flow of cash into dividends and share buybacks has become politically embarrassing, Simmons reckons.

“David O’Reilly is probably one of the most politically astute men in the oil industry. Chevron has joined a committee to decide what peak oil is about and he has got a lot of praise over it.”
Shell’s first wave of ads, after protests over the Brent Spar and troubles in Nigeria, highlighted environmental issues but recent imagery appears less overtly political. Employees — geologists, scientists and the captain of a liquefied natural gas vessel — talk about their job, what it means to them and what they feel about energy issues. It is an attempt to make human and approachable what to many appears big and frightening.

BP insists that its new campaign is brand building, not a tactical manoeuvre. David Welch, BP’s head of marketing, says: “It is a long-term effort to make people understand the full breadth of what we do.”

It might sound disingenuous but it is probably true. Simmons, a lifetime supporter of the oil industry, despairs of oil’s image problem. “One reason it is so disliked is it has never been able to project a human face,” he says, criticising the industry’s weak public relations response to the hurricane disasters.

Rigby wishes big oil was less apologetic. “They are central to the well-being of the global economy. They should be proud of that.”

Perhaps it is because the old certainties are gone and big oil is puzzled about its future that the story is garbled. Perhaps the strange advertising is an early warning, beamed this time from Houston: “World, we have a problem.”

http://business.timesonline.co.uk/article/0,,9072-1958220,00.html