Posts from ‘July, 2006’

EXTRACT: ..regulators confronted Shell/Equilon officials after issuing a string of citations to its gas stations in 2000. Company leaders signed a legal agreement with the air district that year, promising to start an enhanced inspection and maintenance program. Since then, however, records show that the air district has cited Shell/Equilon 371 more times.

Fines may be too small to spur pump upkeep

By Mike Lee
UNION-TRIBUNE STAFF WRITER
July 30, 2006

Most drivers filling up at a gas station lately probably focus on the pump’s fast-rising money counter. But the pump is doing more than selling gasoline – it’s fighting air pollution.

Each pump’s nozzle is designed to keep fumes from leaking into the air and contributing to the formation of smog, which medical experts have linked to health problems such as cancer and lung ailments.

To work right, these vapor recovery systems must be properly maintained.
San Diego County’s Air Pollution Control District issued more than 3,400 vapor-related citations to gas stations from 2000 to April 2006. Its inspectors fined the stations more than $2.8 million, according to records analyzed by The San Diego Union-Tribune.

But with penalties averaging less than $1,000 per gas-vapor violation, it’s unclear whether the air district has gotten the attention of gas sellers. The number of citations dropped less than 2 percent from 2000 to 2005.

Environmentalists and other critics contend that major oil companies accept relatively minor fines as a cost of doing business that is cheaper than staying ahead of problems with their vapor recovery systems.

“It’s far too easy for some of these industries . . . to violate their permit and basically get a slap on the wrist,” said Tim Carmichael, president of the Coalition for Clean Air, an advocacy group based in Los Angeles.

Throughout the county, approximately 1.3 billion gallons of gasoline are pumped into vehicles each year at more than 900 gas stations. Vapor recovery systems collect 10,000 tons of gas fumes annually.

Eight hundred tons of vapor escape into the atmosphere each year, the air district estimates. That’s a dramatic decrease from in the early 1970s, when the vapor recovery system was instituted in the county.

Inspectors commonly cite gas stations for using defective equipment or not performing tests to verify that pollution control systems work properly. Typical problems include torn nozzle bellows, which help capture fumes, and liquid gas clogging the vapor recovery system.

More than half of the vapor-related citations in San Diego County were sent to the corporate offices of six oil giants or convenience store chains. Through contractual agreements, these companies often are responsible for the fines even if they don’t operate the gas stations. For instance, oil companies might own gas stations’ underground storage systems and are thus liable for their gas-vapor compliance.

The most frequently cited company in the county since 2000 was Equilon, which does business as Shell Oil Products U.S. It had 431 citations. Next was BP-Arco with 315, followed by 7-Eleven with 274.

Aggressive enforcer

Oil industry leaders blame the vapor-related penalties on finicky equipment, changing regulations and what some see as overaggressive regulators. The county air district is generally viewed as a strict enforcer of vapor recovery rules in California. Similar standards have been adopted by air regulators nationwide.

“We certainly have invested a lot of time working with the air districts and service station operators . . . to improve compliance because obviously we want this (vapor recovery) program . . . to be very successful,” said Catherine Reheis-Boyd chief operating officer at the Western States Petroleum Association, a trade group in Sacramento.

Even regulators concede that public use and abuse of gas pumps adds to the problems. Customers, for instance, contribute to air pollution when they top off their tanks, which can clog vapor recovery lines with liquid fuel.

“You could set up a (vapor recovery) system . . . and go back two days later and it may be still (in compliance or) it may be way off,” said Dick Smith, director of the county air district.

Starting in September, the district will require station operators to monitor their vapor systems more frequently. The district’s five inspectors typically evaluate each station once a year but tend to make more visits to sites that have received citations.

Beginning in 2009, California gas stations dispensing more than 600,000 gallons a year – which is common for stations in major metropolitan areas – must install devices that alert them to vapor recovery problems. If the complications aren’t fixed, the devices could shut down the pumps.

Equipment troubles

More than 30 years after San Diego County pioneered vapor recovery devices, they continue to prove problematic.
 
It costs $30,000 to $80,000 to install the equipment on pumps at a new gas station, said Jay McKeeman, government relations director for the California Independent Oil Marketers Association in Sacramento.

“California has required innovative technology . . . that has not panned out to be very reliable,” McKeeman said. “The industry in this particular regulatory scheme is the lab rat, except that the lab rat has to pay to enter into the maze and it has to keep paying.”

Former air district engineer Barney McEntire said that if the oil industry had helped to foster the development of vapor recovery technology – instead of actively opposing it – the systems would perform better today.

In 1972, San Diego County became the first in the nation to regulate vapor recovery at retail fuel pumps, said McEntire, who retired from the district in 2003.

He said the oil industry fought the rules in court and threatened to stop doing business with nozzle makers if they helped the county develop vapor recovery systems.

So, McEntire crafted his own nozzle. At his Santee home, McEntire still has the shiny silver prototype, which features a hose-within-a-hose design.

“When we started, there was no equipment at all for recovering vapor from autos,” he said.

Today there are two systems on the market, one that relies on a rubber boot or bellows to gather vapor and another, similar to McEntire’s design, that captures vapor in the nozzle. McEntire said neither he nor the air district filed a patent for his invention because they weren’t allowed to make money off a device inspired by their regulations.

The gas vapor is collected in underground storage tanks and returned to the respective oil company for reprocessing.

‘Long row to hoe’

At the corner of Broadway and North Mollison in El Cajon, the Exxon gas station is like hundreds of others in the county – with one exception. Since 2000, the local air district’s inspectors have issued 11 citations to the station, making it one of the region’s most frequent offenders of vapor recovery laws.

Owner Gil Moore at New West Petroleum in Sacramento is steamed about the way the county air district has treated him and his 29 stations in the county. New West has been the subject of a county lawsuit over air violations and it has been billed for nearly $455,000 in penalties since 2000, district records show.

Moore operates stations in four California air districts. He rates San Diego’s as the worst for being overly aggressive about minor violations.

Ultimately, Moore said, the fines drive up his cost of business, which is passed on to customers.

“Nothing is going to work perfectly” Moore said. “You have to allow for error or there is no such thing as a gas station.”

Air district officials said they use the penalty revenue for such projects as underwriting a program in which residents can exchange gas lawn mowers for less-polluting electric ones and to offset the cost of legal support from the county counsel’s office. None of the revenue pays for the salaries of station inspectors.

New West has plenty of company when it comes to vapor recovery challenges.

“The situation . . . is really pretty consistent up and down the state. It’s been kind of a long row to hoe here with compliance,” said Carol Coy, a top official for South Coast Air Quality Management District, which covers a large part of the Los Angeles area.

In San Diego County, “if (station owners) are not being responsive or they are not paying and settling up the violations . . . we will call them in,” said Smith at the air district.

For instance, regulators confronted Shell/Equilon officials after issuing a string of citations to its gas stations in 2000. Company leaders signed a legal agreement with the air district that year, promising to start an enhanced inspection and maintenance program.

Since then, however, records show that the air district has cited Shell/Equilon 371 more times.

In a statement to the Union-Tribune, company officials said they regularly work with the air regulators “to ensure compliance with all paperwork and permitting issues.” They did not address why their stations had so many violations or specific efforts to reduce vapor recovery problems.

At Exxon Mobil, spokeswoman Paula Chen said the company trains station operators on how to follow California’s vapor rules and it sometimes makes them pay for violations.

“We don’t take these things lightly. We do what we can to reduce the number of them,” she said.

Mike Lee: (619) 542-4570; mike.lee@uniontrib.com
 
Find this article at:
http://www.signonsandiego.com/news/metro/20060730-9999-1n30vapor.html 

EXTRACT: Since this is not going to be a very long letter I intend to address one of you who I assume is the most culpable of the lot. That is the British and Dutch oil interest known as Shell Petroleum Development Company. You are all guilty of the same offences to some degree but Shell is seen as the King Kong of injustice in the region and it deserves special mention and attention in this patriotic letter.

Letter published by The Daily Independent (Nigeria), on Monday 24th July, 2006

By Michael John, angrymichael2004@yahoo.com

Dear Oil Companies,

I am constrained to write you this letter because as a pacifist, I am appalled by the bloodletting in the Niger Delta and saddened by the fact that my fellow countrymen are killing my fellow countrymen because of you. Since this is not going to be a very long letter I intend to address one of you who I assume is the most culpable of the lot. That is the British and Dutch oil interest known as Shell Petroleum Development Company. You are all guilty of the same offences to some degree but Shell is seen as the King Kong of injustice in the region and it deserves special mention and attention in this patriotic letter.

Part of the reason I have always been hesitant to write to you, before now, is because a company has no body to be kicked, no nose to be bloodied and no soul to be damned. I believe you know this too and this informs your policy towards your host communities in particular and Nigerians in general. Another reason for your action might be that you are yet to realise that the world banned slavery and the slave trade in the 19th Century and threw away the myth that some men were superior to others simply because of the colour of their skin. The American Declaration of Independence opens with the words, “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain inalienable Rights that among these are Life, Liberty, and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.”

Though Shell is not an American company, neither do they subscribe to these words of wisdom, one expected them to treat Nigerians like they treat Europeans and Americans in their areas of operation in countries there. This way they would have made the protection of the rights to life, liberty, and pursuit of happiness of members of their host communities a key policy of the company. And they would have persuaded successive Nigerian governments to consider the rights of the locals above commercial oil gains and petrodollars and become agents of peace not destabilisation.

But as I said earlier, oil companies have no soul to be damned, and if they do, I would have stated that they were a sure candidate for hell fire and needed to repent immediately in oil, dust and ashes. Decades ago Iko, an oil-rich community in Akwa Ibom State, protested against the effects of gas flaring from Shell’s activities in the area. They had to be changing their roofs and zincs yearly because of the effects of carbon, not to mention the skin diseases and other health effects and hazards. Their just protest was not met with any mediatory effort on your part, rather you brought in the police and the Iko massacre left about 50 persons dead. That put paid to the Iko crises and business continued as usual with gas flaring, and the cowed Iko people have had to live with this problem ever since.

Recently you had another God-given chance to right this wrong and show yourself as a friend of your host communities but you bungled it. The late dictator, Sani Abacha, had Kenule Saro-Wiwa and others convicted for murder on trumped up charges the European Union representative and other observers claimed would not have secured conviction in court of competent and fair jurisdiction in the world. The Encarta Encyclopedia states thus about the case:

Similarly, a ruthless campaign was mounted against the Ogoni people. The Ogoni live around the Niger river delta. Led by the author, Ken Saro-Wiwa, they protested that exploitation by petroleum company, Royal Dutch Shell since 1958 had ravaged this environment, polluting their farmland and fisheries. Abacha had protesters shot and many of the Ogoni rounded up into detention camps. Finally, in total disregard to international condemnation, Abacha had Saro-Wiwa tried on trumped-up charges and hanged in November 1995.

If Shell had been a people-minded company with a human face it would have been at the head of the campaign to save the life of Ken Saro-Wiwa and this would have created the desired goodwill for it to enter into meaningful mediatory efforts with the host communities. The international community did its best while Shell watched the drama and perhaps believed that the elimination of Saro-Wiwa could stymie the protests in the area. They perhaps believed that he was the soul and spirit of the struggle and therefore decided to let the “law” with all its manifest injustice and the overt judicial murder take its course.

Once again, Shell BP lost a golden opportunity to recreate itself and ended up in the wrong side of history as a company lacking in a community-friendly organisational culture. The popular thinking has tended to be that Shell was guilty of complicity in the judicial murder of Ken Saro-Wiwa and this is enforced by the fact that Shell sent a lawyer to all the court proceedings which led to the conviction and condemnation of Saro-Wiwa, as an observer. What was the lawyer observing? My guess is that he was there to monitor how the script was acted and whether the directors of the script (the judge and the other tribunal members) were acting according to the script at hand.

Whoever coined the word “insufferable” must have had an entity like Shell in mind. Not only have you been colluding in these cases of bloodletting, your cold treatment of your summons by the Senate of the Federal Republic of Nigeria was a manifestation of how little you regard Nigeria and Nigerians as your hosts. Not that Senators are any better than you, because like you, they are living off the fat of the land and while you exploit our oil, they exploit our treasury. But since they purport to represent the people (though the people had no opportunity to vote for them because the Senators had made provisions for their supporters to vote on their behalf), one would have expected you to honour them.

The money awarded to the host communities in a court judgment ought to have been settled by now, but you are contesting it and fighting it in courts of appellate jurisdiction. Which gives one the impression that you actually came for our goods and not our good. You do not flare gas in America or any part of Europe but in Nigeria you do it without even considering the need to compensate the communities who suffer the effects of your flaring. If it were not that you have no soul to be damned you would have known the scripture that says that “you should not do unto others what you would not want them to do unto you.” Which means that if you are not flaring gas in your host countries of Britain and Holland, it is wrong for you to flare gas in Nigeria and what is more? Get protesters killed or harassed for protesting over this.

It has been said the Nobel laureates led by Professor Wole Soyinka will visit the Niger Delta region this month to try and mediate in the crisis. The crisis has tended to be seen as involving the militants and the Federal Government. One disagrees with this and tends to think that this is a problem between a bad tenant and an irate landlord who has decided to take the laws into his hands. The Federal Government has been trying to maintain the peace and ensure that the conflict does not scare away investors and create national insecurity.

When Saro-Wiwa was killed it should have been clear that when a seed dies, it germinates. Saro-Wiwa was killed as a seed and the fruits are the hotheads who range the creeks in military gear with sophisticated ammunition. Their grouse is not against the soldiers or the Federal Government but against the oil companies which they see as forces of occupation. The Federal Government should have responded by commissioning a panel of inquiry into the crisis, to look and proffer solutions to them. Instead, it responded with a show of force and domination as conflict-resolution tool seldom achieves set objectives.

Now Nigerians are killing Nigerians because of a foreign oil interest. It is the same thing as when Europeans were involved in slavery and Africans were killing and selling Africans for the profit of the white man. There might be fighting in the Niger Delta, but I could almost hear laughter in Holland and Britain over the foolishness of Nigerians in killing themselves for them to make profit. Can you please stop this madness?
 

Letter published by The Daily Independent (Nigeria), on Monday 24th July, 2006
By Michael John, angrymichael2004@yahoo.com

Dear Oil Companies,

I am constrained to write you this letter because as a pacifist, I am appalled by the bloodletting in the Niger Delta and saddened by the fact that my fellow countrymen are killing my fellow countrymen because of you. Since this is not going to be a very long letter I intend to address one of you who I assume is the most culpable of the lot. That is the British and Dutch oil interest known as Shell Petroleum Development Company. You are all guilty of the same offences to some degree but Shell is seen as the King Kong of injustice in the region and it deserves special mention and attention in this patriotic letter.

Part of the reason I have always been hesitant to write to you, before now, is because a company has no body to be kicked, no nose to be bloodied and no soul to be damned. I believe you know this too and this informs your policy towards your host communities in particular and Nigerians in general. Another reason for your action might be that you are yet to realise that the world banned slavery and the slave trade in the 19th Century and threw away the myth that some men were superior to others simply because of the colour of their skin. The American Declaration of Independence opens with the words, “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain inalienable Rights that among these are Life, Liberty, and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.”

Though Shell is not an American company, neither do they subscribe to these words of wisdom, one expected them to treat Nigerians like they treat Europeans and Americans in their areas of operation in countries there. This way they would have made the protection of the rights to life, liberty, and pursuit of happiness of members of their host communities a key policy of the company. And they would have persuaded successive Nigerian governments to consider the rights of the locals above commercial oil gains and petrodollars and become agents of peace not destabilisation.

But as I said earlier, oil companies have no soul to be damned, and if they do, I would have stated that they were a sure candidate for hell fire and needed to repent immediately in oil, dust and ashes. Decades ago Iko, an oil-rich community in Akwa Ibom State, protested against the effects of gas flaring from Shell’s activities in the area. They had to be changing their roofs and zincs yearly because of the effects of carbon, not to mention the skin diseases and other health effects and hazards. Their just protest was not met with any mediatory effort on your part, rather you brought in the police and the Iko massacre left about 50 persons dead. That put paid to the Iko crises and business continued as usual with gas flaring, and the cowed Iko people have had to live with this problem ever since.

Recently you had another God-given chance to right this wrong and show yourself as a friend of your host communities but you bungled it. The late dictator, Sani Abacha, had Kenule Saro-Wiwa and others convicted for murder on trumped up charges the European Union representative and other observers claimed would not have secured conviction in court of competent and fair jurisdiction in the world. The Encarta Encyclopedia states thus about the case:

Similarly, a ruthless campaign was mounted against the Ogoni people. The Ogoni live around the Niger river delta. Led by the author, Ken Saro-Wiwa, they protested that exploitation by petroleum company, Royal Dutch Shell since 1958 had ravaged this environment, polluting their farmland and fisheries. Abacha had protesters shot and many of the Ogoni rounded up into detention camps. Finally, in total disregard to international condemnation, Abacha had Saro-Wiwa tried on trumped-up charges and hanged in November 1995.

If Shell had been a people-minded company with a human face it would have been at the head of the campaign to save the life of Ken Saro-Wiwa and this would have created the desired goodwill for it to enter into meaningful mediatory efforts with the host communities. The international community did its best while Shell watched the drama and perhaps believed that the elimination of Saro-Wiwa could stymie the protests in the area. They perhaps believed that he was the soul and spirit of the struggle and therefore decided to let the “law” with all its manifest injustice and the overt judicial murder take its course.

Once again, Shell BP lost a golden opportunity to recreate itself and ended up in the wrong side of history as a company lacking in a community-friendly organisational culture. The popular thinking has tended to be that Shell was guilty of complicity in the judicial murder of Ken Saro-Wiwa and this is enforced by the fact that Shell sent a lawyer to all the court proceedings which led to the conviction and condemnation of Saro-Wiwa, as an observer. What was the lawyer observing? My guess is that he was there to monitor how the script was acted and whether the directors of the script (the judge and the other tribunal members) were acting according to the script at hand.

Whoever coined the word “insufferable” must have had an entity like Shell in mind. Not only have you been colluding in these cases of bloodletting, your cold treatment of your summons by the Senate of the Federal Republic of Nigeria was a manifestation of how little you regard Nigeria and Nigerians as your hosts. Not that Senators are any better than you, because like you, they are living off the fat of the land and while you exploit our oil, they exploit our treasury. But since they purport to represent the people (though the people had no opportunity to vote for them because the Senators had made provisions for their supporters to vote on their behalf), one would have expected you to honour them.

The money awarded to the host communities in a court judgment ought to have been settled by now, but you are contesting it and fighting it in courts of appellate jurisdiction. Which gives one the impression that you actually came for our goods and not our good. You do not flare gas in America or any part of Europe but in Nigeria you do it without even considering the need to compensate the communities who suffer the effects of your flaring. If it were not that you have no soul to be damned you would have known the scripture that says that “you should not do unto others what you would not want them to do unto you.” Which means that if you are not flaring gas in your host countries of Britain and Holland, it is wrong for you to flare gas in Nigeria and what is more? Get protesters killed or harassed for protesting over this.

It has been said the Nobel laureates led by Professor Wole Soyinka will visit the Niger Delta region this month to try and mediate in the crisis. The crisis has tended to be seen as involving the militants and the Federal Government. One disagrees with this and tends to think that this is a problem between a bad tenant and an irate landlord who has decided to take the laws into his hands. The Federal Government has been trying to maintain the peace and ensure that the conflict does not scare away investors and create national insecurity.

When Saro-Wiwa was killed it should have been clear that when a seed dies, it germinates. Saro-Wiwa was killed as a seed and the fruits are the hotheads who range the creeks in military gear with sophisticated ammunition. Their grouse is not against the soldiers or the Federal Government but against the oil companies which they see as forces of occupation. The Federal Government should have responded by commissioning a panel of inquiry into the crisis, to look and proffer solutions to them. Instead, it responded with a show of force and domination as conflict-resolution tool seldom achieves set objectives.

Now Nigerians are killing Nigerians because of a foreign oil interest. It is the same thing as when Europeans were involved in slavery and Africans were killing and selling Africans for the profit of the white man. There might be fighting in the Niger Delta, but I could almost hear laughter in Holland and Britain over the foolishness of Nigerians in killing themselves for them to make profit. Can you please stop this madness?

EXTRACT: Oil Profits Gush: Exxon Mobil’s profit jumped 36%, to $10.36 billion, the oil company’s second-highest quarterly profit ever. Shell’s profit rose 40%, to $7.32 billion. BP’s earnings jumped 30%, to $7.27 billion as the firm unveiled measures to improve U.S. operations following safety and regulatory problems. Chevron reported an 18% rise in profit to $4.35 billion on surging oil prices.

THE ARTICLE

July 30, 2006

INVESTOR’S CALENDAR

This Week

Profit Patrol: Look for earnings reports from United Airlines’ parent UAL tomorrow; Archer-Daniels-Midland, Burger King, Eastman Kodak and Verizon Tuesday; Procter & Gamble and Starbucks Wednesday; Tyco International and Unilever Thursday, and Toyota Motor Friday.

Details, Details: When Time Warner releases its earnings Wednesday, it may also offer details of AOL’s hotly anticipated conversion from a subscription service to a free Web portal. Analysts say such a move could cost AOL $1.8 billion in lost subscription fees.
 
Cadillac’s New Pitch: General Motors’ Cadillac unit will launch a new ad campaign to try to lure young people, women and baby boomers to the luxury car brand.

Rate Actions Abroad: The European Central Bank may raise interest rates by a quarter-point to 3% this week. Also, surging prices in Australia nearly cement the case for a rise there to 6% from 5.75%.

Exploring in the Gulf: The Senate may pass a bill to open 8.3 million acres in the Gulf of Mexico to oil and natural-gas exploration.

Economic Updates: Data on the U.S. savings rate in June will come out Tuesday, the same day the Institute for Supply Management reports on manufacturing conditions for July. Friday brings job news.

Last Week

Stocks Surge: Some strong earnings news and hopes the Federal Reserve will stop raising rates contributed to a 3.2% advance by the Dow Jones Industrial Average — the best week in more than a year. So far in 2006, the Dow industrials are up 4.7%. The Nasdaq Composite Index gained 3.7% for the week but is down 5% this year.

Hospital Chain Sells: Hospital operator HCA agreed to be acquired by an investor group in a $21 billion buyout, one of the largest ever.

H-P Expands: Hewlett-Packard said it will buy business-software maker Mercury Interactive for $4.5 billion, in the computer maker’s first big acquisition under Chief Executive Mark Hurd.

U.S. Growth Slows: The U.S. economy slowed more than expected in the second quarter, growing at a 2.5% annual rate as consumers and businesses tightened their belts. This compares with the first quarter’s roaring 5.6% pace.

Oil Profits Gush: Exxon Mobil’s profit jumped 36%, to $10.36 billion, the oil company’s second-highest quarterly profit ever. Shell’s profit rose 40%, to $7.32 billion. BP’s earnings jumped 30%, to $7.27 billion as the firm unveiled measures to improve U.S. operations following safety and regulatory problems. Chevron reported an 18% rise in profit to $4.35 billion on surging oil prices.

July 30, 2006

Special Report

Prospectors are scouring Africa and the US deserts in search of black gold.
By Tarquin Hall  
 
“FOLKS call me Cactus on account of a friend of my dad’s,” said Charles E Schroeder III, as he emerged from a Texas steakhouse where he had devoured an enormous plate of prime rib for lunch.

“When I was born he took one look at me and said, ‘that boy don’t look like no baby! He looks like a cactus!’ So the nickname kind of stuck.” 
 
Cactus is the real deal: one of the last independent oil prospectors in northwest Texas — a genuine wildcatter. He sports a Stetson, ostrich-skin cowboy boots and drives around with a .308 rifle in the cab of his SUV (bumper sticker: “Don’t mess with Texas!”).

The 51-year-old is the embodiment of the fiercely independent spirit of the Lone Star State. A geologist and self-made man, he plays tennis and loves to visit Wimbledon, but still prides himself on being “basically a redneck kinda fella”.

We drive 20 miles outside his hometown of Abilene, leaving behind strip-mall America with its drive-though culture — a world that even former independent oilman George W Bush admits is addicted to gasoline.

Turning off the road, the SUV bumps across rocky ranch land where steers graze and rattlesnakes doze in the shade of wild oak. It’s here that Cactus is making his latest “play”. In the grand tradition of the American frontier, he is drilling a “wildcat” on virgin land that has never been explored for oil.

If he is lucky, he could be sitting on millions. But despite all the advances that have been made in exploration since the early American boomtown days, the wildcatting business is still fraught with risk.

Cactus has already drilled one “dry hole”. If he doesn’t make a strike on his second attempt, he will be $300,000 (£160,000) out of pocket.

“That’s wildcatting for you,” he grinned, with the glint of a gambler hoping for his next win. “You can do all the geology and science you like, but it’s only when you drill down deep enough that you get a definitive answer. Sometimes all you bring up is mud and you’ve got to just walk away.”

The oil busts of the 1980s and 1990s put most of America’s wildcatters out of business. Cactus only survived because he didn’t have a family to support and he could live on beans. Today, with oil selling at more than $70 a barrel and America desperate for secure supplies, wildcatting is suddenly looking like an attractive prospect again.

“Nowadays this part of Texas is a wildcatter’s paradise,” he said, standing next to his rig, a monster contraption with a 120ft tower, which costs him about $8,000 a day to operate.

“All the majors, like the Exxons, they’re long gone. They’re off looking for the real big plays. So that leaves space for the little guy.”

Cactus swaps his Stetson for a hard hat and leads me up on to the rig. His core team of hands are hard at work. The drilling is done by a crew of tattooed, tobacco-chewing roughnecks who, according to their boss, are dropouts and ex-cons.

“Last week I had to fire a bunch of their asses,” shouted Cactus over the deafening noise of the drill. “We went and run some drug tests and they all came up positive.”

It’s typical of the kind of daily problems he faces. The fundamentals of wildcatting remain the same: it’s still about wheeling and dealing, tough negotiating and, above all, strong nerves. “People who get depressed or overly excited shouldn’t be in this business,” said Cactus. “Like I always say: you’ve got to stay on an even keel to make the deal.”

The biggest strike of Cactus’s career brought in 4m barrels. At today’s prices a find like that would gross more than $250m. But by oil-industry standards it’s small beer. America consumes five times that every day. And although one of the biggest fields in the world, at Sacroc, is only 80 miles to the west of Abilene, Cactus recognises that the odds of making a really significant find in the area are slim.

If he’s going to realise the dream of all independent oil men and hit that one gigantic gusher, he is going to have to search further afield. “I gotta put a nice big piece of cheese on the table,” is how he puts it.

Cactus believes there is still a lot more oil right under America’s nose. Even in Texas there could be big reserves caught in what he calls “strat traps”, geological features that don’t show up during seismic testing.

And he is not alone. Independents across the country are getting back into the exploration business. Rigs and pumps that were mothballed in the 1990s are being dusted off and put back to work. In 2005, 1,384 wildcats were drilled in the US. Independents are also revisiting fields long-since abandoned by the big oil companies where, using new extraction techniques, they are making old wells profitable again.

“Right now we can only extract 40% of the reserves out of the ground,” said Cactus. “Pretty soon we should be able to get it up to 60%. That’s going to mean a whole lot more oil.”

The red Texan sun is low in the sky as the conversation turns, not for the first time, to the Middle East. There is growing anxiety that America, which relies on imports for 60% of its oil, is increasingly vulnerable. Even the hands talk about tension brewing in Iran.

“All they’ve gotta do is knock out the Strait of Hormuz and we’re in a whole lotta trouble,” said one.

Cactus, too, is filled with apprehension. He believes Osama bin Laden’s main objective is to take over Saudi Arabia and cut off US oil supplies. Since September 11 he has become unmistakably patriotic about his role as an oil man.

“I believe George (President Bush, with whom he used to go jogging) hit the nail on the head. We need to stop being so dependent on all these unstable and downright hostile parts of the world. What we need is oil prices to stay high so we can carry on developing production here in America.”

But he is critical of the oil majors for not doing any new exploration in the US, despite pressure from Congress.

“They don’t like taking the risk. They leave it to the wildcatters to get out there and find the oil. Well, right now America needs us more than ever.”

He points out that the east coast has never been drilled for oil, nor has most of offshore California. Much of Alaska is off limits as well.

“The American people are happy for oil companies to go drilling off the coasts of other countries but not our own,” said Cactus. “I call that hypocritical. And I’ve gotta tell you: when prices hit $300 a barrel the public’s going to change their tune. They’re going to be screaming, ‘Go get that oil! Go drill wherever you like!’” I take my leave of Cactus, promising to return later to see how he has progressed with his wildcat, and drive the 125 miles to Houston, the so-called oil capital of the world. The big oil companies are all headquartered here in a skyline of glistening glass and steel towers.

In the Houston Club, the talk is all about the race to find new oil and gas in the world’s unexplored regions — a race that is getting tougher not only due to the politics of Venezuelan president Hugo Chavez and Middle East instability, but the growing demand from China and India.

“Wherever I go, I run into Chinese and Indian exploration and negotiating teams,” said geologist Gabor Tari. “So far they don’t have the expertise when it comes to deep-sea exploration, so they have to piggyback off other people’s deals. But they’re catching up fast.”

Given the extraordinary levels of investment required in searching for oil in the less accessible parts of the world, you might think there was no room for independents. But one wily American wildcatter is out there competing with the big boys.

Gene Van Dyke, a 79-year-old geologist, is probably the oldest wildcatter left in the business. He began his career in his twenties by hitchhiking to Wichita Falls, Texas, and sniffing out prospects. In those days, when he came across some promising-looking land, he would talk the owner into leasing him the mineral rights and type up the contract on a portable typewriter. Then he’d head to Dallas to find an oil company interested in drilling.

“When I started out I was so broke I used to have to sleep in whorehouses,” winked Van Dyke, when we meet in his Houston office. He strikes me as the kind of man who would be more comfortable in rolled-up sleeves rather than his jacket and tie. “It was tough to be around all those pretty girls and have the urge but not the cash.”

Fortunately for Van Dyke, he prospered. After discovering two gas fields in Louisiana in the 1960s, he went into offshore drilling in the Gulf of Mexico. In the 1970s, he took this expertise to the North Sea where he went wildcatting off the coast of southern Holland.

Today, Van Dyke is an extremely wealthy man with a lifestyle straight out of the TV show Dallas. He lives in a sprawling mansion with 22 “johns”, or lavatories, and a bar that puts JR Ewing’s to shame.

His third wife is Swedish and looks at least 20 years his junior. And he has acres of stunning offices on the 12th floor of 3, Greenway Plaza, with commanding views over Houston. Not bad for a guy from Normal, Illinois. But it isn’t enough. Like Cactus Schroeder, Van Dyke still hopes to land the big one.

“I’ve spent my whole damn career trying to get ahead of the curve,” he said. “Now, at long last, I’m ahead of it. I’m swinging for the fence. Going for home runs.”

Van Dyke has got out in front through foresight. In anticipation of today’s oil rush, he has travelled the length and breadth of Africa “going after the big elephant”. While the big oil companies concentrated on Angola and Nigeria, he hunted elsewhere. In Gabon he met President Omar Bongo, who has held power since 1967. In Ghana, he found himself negotiating face-to-face with President John Agyekum Kufuor.

“I had this huge map of off-shore Ghana that I wanted to show Kufuor and it was so big I had to open it up on the floor,” said Van Dyke. “So the president got down off his throne, or whatever you call it, and went down on his hands and knees next to me. All his lieutenants thought this was horribly undignified. They tried to get him up, but he was having a good time.”

Vanco, the company Van Dyke founded, has 20m square miles of African offshore territory under lease, equivalent to 70% of the Gulf of Mexico’s deep-water fields. He believes the region could hold up to 10 billion barrels. So far, drilling off the coasts of Morocco and the Ivory Coast has been moderately successful. But Van Dyke, who brings in investors and spreads most of the risk, has big expectations for the waters off Madagascar, where he is due to start drilling next year. “Even if I hit only 1 billion barrels of oil, it’s going to make Vanco a very big company,” he said.

Van Dyke is also hunting in colder waters. In April, he partnered up with Nathaniel Rothschild to bid for a tender in the Black Sea off the coast of Ukraine. Together they saw off stiff competition from Shell, Exxon Mobil and other international competitors. In 2007 Vanco will undertake the first deep-water exploration in the Black Sea, the only virgin sedimentary basin left in the world.

The walls of Vanco’s conference room are plastered with seismic results from the territory, some 3.2m acres. The subterranean structures they reveal are comparable to those found in the Caspian Sea, where the Russians control some of the largest fields on the planet. Van Dyke points to gigantic “gas vents” clearly visible in the rock formations, the telltale sign of vast deposits.

“The technology to drill at the depth required has only recently become available,” he said, showing me a photo of the semi-submersible rig that will drill at depths of more than 300 meters. “I think we could be looking at several major fields.”

Given the Russian gas stranglehold on Ukraine, Kiev is just a little anxious to know if his estimate is accurate. Yet despite the vast scale of the project, the basic rules of wildcatting still apply. Van Dyke won’t be able to give them definite answers until 2008.

“I’m doing the same thing I’ve always done on a bigger scale,” he said. “But nowadays you’ve got to be fast on your feet. Especially with the Indians and Chinese out there.”

Van Dyke is critical of the oil majors, which he said aren’t doing enough exploration. He points out that in 2005, Exxon Mobil spent more buying back its own shares than it did on exploration, research and development. “The majors are after big profits whereas the Asians just want the product,” he said. “Right now, the Indians and the Chinese are building refineries, getting into wildcatting, doing deals everywhere you go.”

I ask him if there is a crisis looming; if, before long, the West is going to find itself struggling for oil supplies. “Let me put it this way,” he said. “If the Chinese achieve the same standard of living as we enjoy in America, they’ll need the equivalent of all the oil used in the rest of the world today.”

Van Dyke sees no alternative but for the West to start moving away from a hydrocarbon-based economy. But in the meantime, he believes there is a lot of money to be made in tar sands, from which oil can be extracted.

“The Canadians have more than one-and-a-half trillion barrels of tar sands and the Venezuelans about the same. We’re going to be getting into them in a big way.” “It doesn’t sound like you are planning to retire,” I venture.

“Retire? Why would I retire? I don’t hunt or fish or play golf. I’ve always worked. Besides, I’m about to make the strike of my life.” Back outside Abilene, Cactus has struck oil at 4,800 ft and estimates the field should hold 1m barrels. Around the rig, the sweet smell of crude, so unlike the harsh reek of petrol, hangs in the air. Cactus shows me a sample, dipping his finger into the thick, black liquid. “Not to brag, but that’s the best-quality oil you’re ever likely to find,” he said proudly. He drove me back to Abilene, passing dozens of SUVs, pick-up trucks and Humvees, which average just 10 miles per gallon. The FM station he is tuned to carries a call-in show with the public complaining about oil prices. Americans, it seems, still believe in their God-given right to cheap gasoline.

“Most people in this country don’t understand that there’s no easy oil left and that it’s a finite resource,” said Cactus. When I comment that he’s hardly conserving petrol by driving a gas guzzler, he insists that in his business he needs a big, off-road vehicle. But he takes my point.

“A lot of people round here drive a four-wheel ’cause of the whole Texan image thing,” he said. “I know one guy who takes his to the car wash every time it gets a speck of dust on it. “Americans have a love affair with the car. But that can’t last. People are going to have to be more conservative.”

“And what about you wildcatters?” I ask as we pass a nodding donkey pump, a familiar feature on the Texan landscape. “Are you facing up to the future?” Cactus grins. “There’s still a lot of oil out there for me to find,” he said. “But if I had a son, I guess I’d advise him to get into something different. From what I hear, there could be a good future in hydrogen.”
 

EXTRACT: It was not the first time Browne and Sutherland had clashed. They also failed to see eye-to-eye over a tentative plan hatched last year for BP to merge with Shell. The potential mega-merger, which could have created a global energy giant worth more than £250 billion, was discussed between board members, but the idea was dropped. Browne was thought to be in favour but Sutherland argued it would be impossible to execute. BP has also cast its eye over French oil firm Total.

THE ARTICLE

July 30, 2006

Lord Browne has finally announced a date for his retirement after spending his entire working life with BP. The parting will be a wrench not just for him, but for the oil giant as well, reports Tracey Boles 
 
LORD BROWNE, the chief executive of BP, shared a pew with Tony Blair last weekend.
The pair were guests of honour at the wedding of Anji Hunter, the former Blair aide who now runs BP’s PR machine, to Sky political editor Adam Boulton. 
 
It was a happy occasion, and Browne, thrice voted Britain’s most admired businessman and dubbed the “Sun King” of the oil industry, joined in. He was all smiles as he arrived for the celebrations at the elegant Wren church of St James’s on Piccadilly, shaking hands with the assembled members of the cabinet and chatting with Blair.

But only hours earlier Browne had been fighting for his future. At a tense meeting on Friday at BP’s London headquarters, a short stroll from the church, he had locked horns with Peter Sutherland, BP’s redoubtable Irish chairman.

At issue was the date of Browne’s departure from the company he helped build into Britain’s largest. Sutherland was worried that Browne would try to extend his reign beyond 2008, when he would reach the company’s retirement age of 60. After months of rumours, matters had come to a head over the previous week, when reports in favour of Browne staying on had surfaced in the press and become a City cause célèbre.

Sutherland, 60, decided to confront his chief executive. At the meeting in his office, he pressed him to clarify the position publicly.

An insider said: “Sutherland told him you don’t have to go straight after your birthday in February 2008, you can go later in the year. But go.”

Initially reluctant to make a statement, Browne eventually agreed on the grounds that the speculation was spiralling out of control. Last Tuesday he announced he would retire at the end of 2008.

BP’s board now faces what one leading investor has called “the most difficult decision it has ever had to make” — filling Browne’s shoes. In just a decade, Browne has turned BP from the oil industry’s also-ran into a giant whose operations span the globe.

He has made no secret of his scorn for forced retirement, branding it ageism. He is not alone in his views. The issue is prompting a wave of shareholder activism, with investors saying mandatory retirement ages contravene incoming age discrimination legislation.

But Browne’s desire to stay threatened to tip BP into crisis.

The trouble at the top comes as the group faces a difficult period.

Last year its reputation for safety was rocked by an explosion at its Texas City refinery which killed 15 people. There was also an oil spillage in Alaska, and most recently BP has been accused of cornering the propane gas market in America, leading to a criminal investigation by the US authorities, and the threat of billion-dollar class action lawsuits by irate consumers.

BROWNE, a diminutive man with a heavily lined face, has been at BP man and boy. His father, a former Army officer, also worked for the company.

As a child visiting Iran, he witnessed spectacular oilwell blowouts, which left him with a lingering fascination for the industry.

He joined BP at 18 as a university apprentice while studying physics at Cambridge, from where he graduated with a first-class degree.

Later, Browne made his mark with a scheme to sell small interests in the giant Forties field in the North Sea, a plan that acted as a tax cover for the firms investing and cut their exploration costs.

He was elevated to chief executive in 1995 after four years as head of the exploration and production division.

Before his appointment to the top job, the company was widely perceived to be in decline. His predecessor but one, Sir Robert Horton, was forced out after presiding over a slump in performance. Lord Simon, the next chief executive, stabilised the company, but by the mid-1990s BP was still seen as reliant on cash from elderly fields in the North Sea and Alaska.

Fast forward a decade and BP is a leviathan worth £130 billion and producing 4m barrels of oil and gas equivalent a day. With oil prices high, record profits have become routine. Shareholders have feasted on dividends and buybacks.

Browne turned BP into Britain’s biggest company and the second-largest listed oil company in the world with canny acquisitions in the late 1990s, when the oil price was low. He bought two US firms, Amoco and Arco, in rapid succession. In 2003, he completed the transformation of BP by spearheading what was then regarded as a risky push into Russia through a joint venture with local firm TNK. The partnership was hailed as the oil deal of the decade.

Jason Kenney, analyst at ING, said: “It was a testament to his vision and strategic thinking. He deserves all the credit he gets.”

Browne, who is single, is wedded to his job. He has a wide variety of interests, ranging from antique furniture to the arts, particularly early Italian prints, but the cigar-loving executive lacks close family ties. He is an only child and his mother, Paula, a Hungarian Auschwitz survivor to whom he was very close, died six years ago.

He has admitted he is hooked on business, and made it clear he has no intention of slowing down as he approaches 60. In April, he made a passionate speech about mandatory retirement ages. 
 
He said: “When did you last see the word ‘old’ used as a positive attribute for anything other than works of art or bottles of alcohol? This is an issue of prejudice against individual men and women whose active, useful lives are brought to a premature and wholly unnecessary end. The waste is shocking and the prejudice is intolerable.” 
 
In public, Browne has been careful not to connect his strong personal views about age discrimination to his own situation. In a recent appearance on Desert Island Discs, he made it clear that he thinks there comes a time to hand over to a younger generation.

But sources close to BP say they believe Browne has waged a private campaign to stay on. They point to “overt” signals such as his public statements on ageism, and more “covert” ones.

A source said: “A bizarre collection of business people who have nothing to do with BP have rung newspapers and BP non-executives saying that Browne should be allowed to stay on.”

Others remain sceptical that Browne, known for his mastery of public relations, would adopt such tactics, but his failure to set a firm retirement date earlier put him on a collision course with his chairman.

Sutherland, a former Irish attorney-general and EU competition commissioner, is also a City grandee. He joined the BP board in 1990 and has been non-executive chairman since 1997. He is also chairman of Goldman Sachs International, the European arm of the heavyweight investment bank.

Last year, a special committee decided to keep him on at BP for a further three years because they didn’t want a new chairman appointing a new chief executive. Ironically, when Sutherland leaves in 2009, he will be 63, but BP’s retirement rules can be waived for non-executives.

Browne said last week: “Peter is no pushover.”

The pair are friends as well as colleagues. Browne attended the wedding of Sutherland’s daughter last year, one of just a clutch of old friends to be invited. They have been on holiday together at Sutherland’s house in Spain. Browne, who has a house in Venice, still intends to visit Sutherland there this year.

However, last week reports began emerging that big differences had developed at the top of BP over succession.

It was not the first time Browne and Sutherland had clashed. They also failed to see eye-to-eye over a tentative plan hatched last year for BP to merge with Shell. The potential mega-merger, which could have created a global energy giant worth more than £250 billion, was discussed between board members, but the idea was dropped. Browne was thought to be in favour but Sutherland argued it would be impossible to execute. BP has also cast its eye over French oil firm Total.

Last Friday Sutherland decided enough was enough when Merrill Lynch published a note calling for BP to reassess its executive director retirement policy so it could retain a man of Browne’s “calibre”. The note described Browne’s retirement as “a potential medium-term risk”.

On Friday evening, Browne and Sutherland had a private meeting in the chairman’s top-floor office in St James’s, where the Irishman implored Browne to make it clear once and for all that he was going — and when.

Sutherland could afford to speak forcefully. Sources close to him said last week that he had received the backing of the entire BP board, who believed that 12 years was long enough for any chief executive.

By Sunday, Browne had agreed to speak, as leading investors started calling for the compulsory retirement age to be lifted. At BP’s half-year results on Tuesday, he said: “I want to be completely clear. As I have said many times, I will be retiring in 2008. Peter Sutherland and I have discussed this and agreed between ourselves and the board that I will be leaving BP at the end of 2008. Even if I was asked to stay I would decline.”

Browne has said he does “not intend to spend his life on the golf course”. The controversial Merrill Lynch note suggested he might like to be chairman of BP, but sources say the board would never sanction it, and that non-executive director Sir Bill Castell is potentially in line for the role.

Whatever Britain’s most admired businessman does next, it is unlikely he will be short of offers. Friends say he favours making as much money as possible in finance before giving it all away through a philanthropic trust. BP’s board, which began thinking about his succession two years ago, will now start vetting Browne’s potential replacements in earnest. They will be benchmarked against external candidates. Anna Mann, the executive headhunter, has been hired to find them.

THAT the disagreement was allowed to become public is unusual for BP. Its slick PR machine normally prevents outsiders from getting an accurate view of life inside the company. Another rare — and unflattering — insight into the firm’s inner workings came a month ago, when BP was hit with a civil lawsuit alleging it had cornered the US market in propane fuel to boost prices artificially. The suit was filed by the Commodity Futures Trading Commission (CFTC). It charged that in 2004 BP traders — with the consent of senior management — “purchased enormous quantities of propane to establish a dominant position” in the market and force up prices.

Among its evidence are taped transcripts of conversations between BP traders which allegedly show how the British energy giant attempted to profit from rigging the price of a fuel. Along with the CFTC suit, BP faces a criminal investigation by the US Justice Department and class-action lawsuits brought by lawyers representing consumers. BP denied any wrongdoing and said it was prepared to fight the case in court. “It makes you wonder what the oversight is like at BP. Maybe the company is just too big,” said Phil Flynn, energy analyst at Chicago-based Alaron Trading. It was the latest incident to put BP’s American operations under the spotlight.
 
Last year a fire at BP’s Texas City refinery killed 15 people and injured 500 more. US safety regulators subsequently found problems at another BP facility, in Toledo, Ohio. The company has already set aside more than $1 billion to settle compensation claims. In April, US officials lumped BP in with companies that “ignore their obligations under the law and continually place their employees at risk”. 
 
In March 270,000, gallons of crude oil poured out of a BP pipeline in Prudhoe Bay, Alaska, the biggest oilfield in North America. BP was accused of having neglected long-standing problems. BP has entrusted Robert Malone with getting the US operations back on track. The company’s woes are likely to have been consigned to the past by the time the new chief executive is in place, analysts say. The new BP boss will have a hard act to follow but, as Sutherland said recently, BP is about more than just one man.

A leading oil analyst said: “It is such a well-run company that the wheels are going to keep going a long time. It will take a lot for it to go off the tracks.” BP’s strategy runs until 2010. The main task facing the new BP chief will be a perennial one — finding new reserves of oil and gas. As most of the easy oil around the world has gone, it is a quest that is likely to push BP into new frontiers.

“BP will have to try to get growth back into focus and keep on top of costs,” said ING’s Kenney — a task it will have to tackle without the talismanic Browne.

A tough act to follow

FIVE people inside BP are vying to be the next chief executive of Britain’s premier oil company, but they are struggling to step out of the shadow of the man labelled the Sun King of the oil industry.

They are Tony Hayward, the energetic head of exploration and production; John Manzoni, head of refining and marketing; Iain Conn, who manages BP’s internal functions; Robert Dudley, the chief executive of TNK-BP, and Andrew Inglis, deputy to Hayward.

Praise for the contenders is solid rather than ecstatic. ‘All bring a sound strategic and credible presence,’ according to Jason Kenney, oil analyst at ING.

Hayward is routinely cited as the frontrunner because the exploration and production division is the traditional breeding ground for BP’s chief executive.

‘He is at the coalface,’ said Kenney. ‘He has had to negotiate with the Alaskan authorities and tip his hat when mistakes are made.

‘Other people are more charismatic but it is not all about that. He would be Ronseal for the business as far as we are concerned.’

But industry views on him are mixed. An analyst who listened to BP’s results presentation last week said: ‘Manzoni sounded like a chief executive but Hayward did not. Conn didn’t say anything at all because he wasn’t asked.’

Hayward’s star could also fall due to events in Alaska, where BP has suffered a serious oil spillage.

And Manzoni could have been tainted by last year’s refinery explosion in Texas.

The problem could be that, because Browne has dominated the company for so long, it is hard to shine under him.

‘BP has to do some good PR on the internal candidates,’ said an industry source.

BP is taking no chances on Browne’s succession, however. It recently admitted that while it still favoured an internal appointment, it would be ‘benchmarking’ the candidates against external contenders. Executive headhunter Anna Mann has been hired to find suitable external candidates.
 

(Filed: 30/07/2006)

BP’s decision requiring him to step down as chief executive in 2008 came as a blow to Lord Browne. Sylvia Pfeifer describes the events leading up to the announcement and looks at the potential successors

It never gets too hot in the Andalucian mountains in southern Spain, even during the brutal summer month of August. A cooling breeze will no doubt be welcome when Lord Browne, the chief executive of BP, meets his chairman, Peter Sutherland, there next week.

Browne will be staying with Sutherland and his wife at their house. It was a holiday that had been arranged long before last week’s extraordinary events at the oil company, which saw two of the biggest personalities in British business clash. At issue was nothing less than the succession at Britain’s biggest company.
 
Peter Sutherland told Lord Browne: ‘John, you need to give people a retirement date’ 

After 11 years at the helm, Browne had been due to retire from BP when he turned 60 in February 2008. But several events had recently led to renewed speculation that Browne might want to delay his retirement from the oil company.

Ten days ago an analyst’s note had set the City abuzz with rumours that Browne did not want to leave and was keen to put back his retirement date. For Sutherland, the press coverage of the note on the Friday morning had re-opened questions that he felt had already been put to bed. He summoned Browne to his office.

When Browne arrived, Sutherland, a feisty 60-year-old who also chairs the international arm of Goldman Sachs, the investment bank, got straight to the point. According to an insider, the chairman told Browne, who was due to present BP’s interim results four days later: “John, you need to give people a retirement date on Tuesday. You need to give people certainty.”

Sutherland, who is described by people who have dealt with him as “very tough, even rough”, stressed that he was speaking with the full backing of the board.

Browne, in stature no match for the portly Sutherland, was taken aback at the aggressive tone. Regularly voted one of the world’s most admired chief executives during his 11 years in the top job, he had built BP, through a series of astute acquisitions, into Britain’s biggest company, with a market value of almost £130bn.

He was reluctant to agree, arguing that the results presentation was not the occasion to make such a statement. Sutherland pressed further. “If you don’t want to go on your birthday, you can stay till July,” he offered.

Browne agreed to think about it over the weekend. The next day, amid growing speculation among City executives over the succession at BP, he attended the wedding of Anji Hunter, BP’s communications director and a former Downing Street adviser, and Adam Boulton, the political editor of Sky News. But news of the conversation was beginning to leak out. Some of the City’s leading figures were putting in calls to board members at the oil company to try to find out what was going on.

Sunday brought more newspaper headlines about the rift at the top of Britain’s largest company. Sutherland, abroad for the weekend, was faxed the articles, only to see a report of his conversation with Browne repeated in the press. He realised that he needed to act quickly if he did not want the situation to spiral out of control.

On Monday, Sutherland put in calls to a number of non-executive directors. BP’s chairman’s committee had been handling the matter of Browne’s departure date. It was an international affair: apart from three Americans who joined with the Amoco merger – Walter Massey, John Bryan and Erroll Davis – there is Iowa-born DeAnne Julius, the former World Bank chief economist, one-time CIA analyst and ex-member of the Bank of England’s Monetary Policy Committee. They outnumber the UK contingent of Douglas Flint, HSBC’s finance director, and Sir Ian Prosser, BP’s deputy chairman and a veteran of boardrooms from Boots to InterContinental Hotels, who, together with Antony Burgman, Unilever’s Dutch chairman, make up the committee.

Despite their business backgrounds, and even though Massey sits on President Bush’s council of science advisers while Davis is on the US Olympic committee, the line-up of the non-executives has come under fire before, with leading investors arguing that it is not as impressive as it should be for Britain’s biggest company. One notable newcomer is Sir William Castell, the former head of Amersham, who is also a non-executive director of GE, the US giant.

Prosser, for one, is no stranger to boardroom disputes. Two years ago angry investors at J Sainsbury rebelled at his appointment to succeed Sir Peter Davis as chairman of the supermarket group. The shareholders, who had not been consulted, believed he had destroyed value at Bass, the brewers, by overpaying for acquisitions. Within seven days, Prosser had withdrawn.

But last week, according to a company insider, the BP board was unanimous in backing Sutherland’s decision that Browne should abide by the rules. Anna Mann, the headhunter, had also been brought in in recent weeks to advise them on succession.

“Sutherland talked to the non-executives. It was about Browne and the board, not Browne and Sutherland,” says one person familiar with the situation.

By Monday evening Sutherland had renewed his pressure on Browne. He offered him a compromise: the board would let him stay until the end of 2008, allowing Browne to lead BP’s celebrations during what will be its centenary year.

Browne was torn. His heart lay with BP, but he also knew that his legacy would inevitably be linked with his succession. He accepted the 10-month extension.

On Tuesday, in front of popping flashbulbs, Browne chose his words carefully. “A company isn’t about one person,” he said, echoing the words Sutherland had used in private.

He insisted there was no tension between himself and his chairman. “We discuss and debate rigorously things that we do. But we have a long-standing relationship and it’s a good relationship and I think all the speculation is misplaced.”

Browne added: “At the end of 2008 I will have been CEO of BP for over 13 years and that is quite a long time. This has been a matter of discussion for the chairman, the board and me for a very considerable time.”

It was a remarkable piece of showmanship from one of the greatest communicators in the industry, and one designed to draw a line under a dispute that had threatened to engulf the oil giant.

By the end of last week, the company had closed ranks, with insiders insisting that relations between Sutherland and Browne were back to normal.

Despite the boardroom dispute, the two men are said to be business friends. Browne is friendly enough with Sutherland to have attended the wedding of his daughter 18 months ago and has been a regular visitor at Sutherland’s home in Andalucia.

His planned trip to Spain next week is going ahead, said one insider, adding: “It’s not to talk about work, it’s to talk about life”.

Although Browne will now remain at BP until the end of 2008, the priority for the board will now be to pick the right successor. Mann has been working on succession planning for some time, benchmarking the internal candidates.

It is understood both Prosser and Sir Tom McKillop, the former chief executive of AstraZeneca who is also chairman of Royal Bank of Scotland, are heavily involved in the succession planning.

“Ian and Tom have been asking people about the calibre of the potential successors. There is a lot of concern within the company over the succession,” said one FTSE100 executive familiar with the process last night.

The company has spent several years grooming five contenders.

All already run huge businesses in their own right. They include Tony Hayward, the head of exploration and production, who is tipped as a favourite; his deputy Andrew Inglis; John Manzoni, the head of refining and marketing; and Iain Conn, who manages BP’s internal functions.

But in the past few months Bob Dudley, the head of TNK-BP, BP’s Russian venture, has emerged as a contender. Moscow-based Dudley is said to have forged a good relationship with investors who had initially been sceptical of the venture, seeing it as too risky.

Last week, leading investors said they would accept the board’s decision to let Browne go in 2008. At least two of BP’s largest shareholders had previously indicated that they would welcome Browne’s retirement being postponed.

“Our general stance is that we do not believe it is the role of investors to choose the executives. We believe it’s the role of the board,” says one leading investor.

Whoever succeeds Browne will not only have a tough act to follow but must also navigate the world’s second largest oil company through several strategic challenges.

Despite raking in record profits thanks to the soaring oil price, the world’s international energy companies are having difficulty finding new oil and gas reserves when oil-rich nations are guarding their own resources carefully. They are also facing more competition from national champions, notably from China and India, which are themselves trying to secure more reserves.

At Tuesday’s results announcement, Browne said he had put forward “more than three names” of possible successors but added that the decision was the board’s. Given what he has done at BP over the past 11 years, however, he will want to make sure that the person eventually chosen is the right one.

“BP is still a great company to work for,” said one board member of a FTSE100 company. “Your legacy becomes your succession, that’s the major issue.”

It will perhaps give Browne and Sutherland something to talk about in Spain next week.

July 30, 2006, 12:07AM

LYNN J. COOK
Copyright 2006 Houston Chronicle

John Hofmeister: President, Shell Oil Co.

High prices, war in the Middle East and global warming concerns have transformed energy from a dull industry taken for granted by many Americans into a top-of-the-mind pocketbook issue for consumers.

The Chronicle posed 10 questions to several top executives of the world’s major oil companies on topics ranging from gasoline prices to U.S. energy security to hefty company profits.

Some of the CEO answers — delivered by e-mail last week as BP, Royal Dutch Shell and ConocoPhillips were reporting their second quarter financial results — might be surprising.

James Mulva, head of Houston-based ConocoPhillips, supports the idea of raising fuel efficiency standards, forcing automakers to build vehicles that get more miles to the gallon.

Robert Malone, BP’s new chairman of U.S. operations, said he wanted to buy a hybrid pickup truck but couldn’t find one that was American-made. He opted for an E-85 — ethanol-ready — truck instead.

And John Hofmeister, president of Shell Oil Co., declared “The debate is over about climate change.”

Some answers were edited for length.

Q&A: John Hofmeister, president, Shell Oil Co.

Q: What is the greatest threat to U.S energy security today?

A: There is no single threat to energy security. As global demand for energy keeps growing, supply disruptions, access to untapped oil and gas supply and energy efficiency will all be challenges that confront us.

But, I firmly believe that we can secure energy supply in the U.S. and improve the prices that we pay for it. Access, diversity of supply and managing demand will all play vital roles.

Easy oil has been tapped, at least in the U.S. Today, we’re exploring for resources in more difficult and remote frontiers. In the U.S. alone, there are more than 100 billion barrels of recoverable oil in restricted areas beneath federal lands and coastal waters. Shell is a leading advocate for responsible access to these resources.

Fossil fuels are at the heart of our energy system and will be for the foreseeable future. But we must continue to develop new technologies. Shell is investing now to tap unconventional sources like oil shale in Colorado and the oil sands in western Canada. But energy security takes the commitment and involvement of everyone — including energy companies, individuals and policymakers. A culture of conservation will help to manage demand.

Q: President Bush has said the U.S. needs to wean itself from Mideast oil. What do you think of this assertion?

A: The U.S. is not self-sufficient in energy. It imports more than 60 percent of its energy from other countries, including the Middle East, Canada, Mexico and Venezuela. And our dependence on imported energy will continue for the foreseeable future, making diversity of supply as important as abundance of supply.

Alternative and renewable resources offer promise, but they take time to develop and bring to market. Even when these sources become commercially viable and begin to play a bigger role, we’ll continue to rely on fossil fuels because of their efficiency and abundance. In my view, this reinforces the need for strong U.S. and international energy relationships — interdependence, if you will.

The business model for successful global companies is a robust economy where U.S. firms can operate around the world and non-U.S. firms can operate here.

Q: Ethanol has been talked about for decades, but with a new blessing from Congress it seems to actually be a reality now. Is ethanol here to stay? Is its promise all it’s cracked up to be?

A: Shell is one of the largest purchasers of ethanol in the world, and one of the largest marketers of ethanol-blended gasoline. We believe the fastest and most efficient way to increase the use of ethanol is to blend it into the existing gasoline grades at a ratio of 5 to 10 percent. At this ratio, the fuel can be used in existing vehicles and can be distributed with the existing infrastructure.

In contrast, E-85 is only compatible with a few existing vehicles and requires dedicated storage tanks and dispensers. But we also believe there’s a need to look beyond corn- or sugar-based ethanol to second-generation or cellulosic ethanol, which uses waste products such as wood chips or carbon fibers. We’ve joined forces with Iogen Corp. and Choren Industries — leaders in the development of biofuels — to further investigate this.

Q: Gasoline appears to be hanging around $3 a gallon in the U.S. Why is it at this level and what factors could push it higher in the next year?

A: Shell recognizes that rising fuel costs affect our customers, but very simply, supply is just keeping up with demand. And that’s what’s driving up prices.

Worldwide demand for oil has increased rapidly in recent years, led by the growth of the economies in places like China and India.

While the overall supply of crude has also increased, it has not kept pace with demand. A lot of people suggest crude prices are being elevated by geopolitical tensions and, possibly, by financial speculators. To whatever extent those factors do exist, they’re beyond our control. We must deal with the market as it is, and in this regard, supply and demand prevail.

Q: Does global warming exist? If so, does human use of fossil fuels perpetuate the problem?

A: The debate is over about climate change. Shell shares the widespread concern that the emission of greenhouse gases from human activities is leading to changes in the global climate. Oil and gas will continue to provide an important share of the world’s energy needs in this century, but we clearly recognize the challenge of meeting future energy demand while simultaneously addressing the issue of climate change.

Q: Do the major energy companies have a responsibility to seek out and develop alternative energy sources?

A: Finding environmentally and socially responsible ways to provide more oil and natural gas is an important part of our energy future. So is developing commercially viable alternatives. Shell is serious about doing both. In fact, we’ve invested $1 billion in renewables over the last five years. Shell plans to have a substantial commercial business in at least one alternative energy technology.

Q: Why do energy companies need to make these kinds of profits, and what are you doing with all that cash?

A: The energy industry is one of the world’s largest industries, so our numbers are large because our business is large. And although revenues are high, to provide consumers with the energy they need is costly. Billion-dollar projects for future energy resources can take between 10 and 15 years to develop. Shell is spending at record levels to increase oil and gas supplies. We’ve made extraordinary capital commitments this year — $19 billion. And, we’ve already promised $21 billion for next year.

We think we’re unique in that we’re investing about as much as our profits back into our business to find new oil and gas reserves, develop new and improved technologies and expand the so-called downstream assets, such as refineries, and research alternatives.

It takes a deep level of financial strength to deploy such large amounts of financial capital in risky environments and in a cyclical industry. Fragmented or financially insecure players have a much more difficult time.

Q: Should the federal government raise Corporate Average Fuel Economy standards, forcing automakers to produce more fuel-efficient vehicles?

A: Ultimately, that decision is for policymakers. However, at Shell, we do believe all industries should strive to improve energy efficiency.

We’ve found significant cost savings in our own facilities by adopting energy-efficient measures. For example, our refineries’ energy efficiency has continuously improved since 2002, and we’ve also launched a three-year capital investment program specifically aimed at boosting efficiency in refining. Those measures are saving us $60 million a year and reducing our emissions by 572,000 tons of CO2 annually.

Q: There’s been a call from some to tax gasoline further — by as much as $1 a gallon — to invest in mass transit systems and government research of alternative fuels. What do you think?

A: Changes in fiscal policy are a matter for governments. Shell will support, and of course comply, with any reasonable decisions that society at-large and policymakers may choose.

Q: What kind of car do you drive? Do you think hybrids are a good way to practice conservation?

A: We have one vehicle. It is a Volkswagen Phaeton, averaging 23 miles per gallon on the highway. Earlier this year, Shell put a married couple on the road in a standard Volkswagen Golf and sent them around the world.

Not only did they set a Guinness world record for fuel efficiency, they also were able to significantly increase the fuel efficiency of the vehicle by using our Fuel Stretch tips, such as using cruise control, maintaining the proper tire pressure and using higher gears.

The Taylors achieved 52.1 miles per gallon when the owner’s manual said their Volkswagen would get 34.4 mpg.

What does it take to quench America’s mighty thirst for gasoline?

Pulitzer-winning correspondent Paul Salopek traced gas pumped at a suburban Chicago station to the fuel’s sources around the globe. In doing so, he reveals how our oil addiction binds us to some of the most hostile corners of the planet—and to a petroleum economy edging toward crisis.

STORY BY PAUL SALOPEK, TRIBUNE CORRESPONDENT
RESEARCH BY BRENDA KILIANSKI, TRIBUNE RESEARCHER
PHOTOS BY KUNI TAKAHASHI, TRIBUNE PHOTOGRAPHER

About the project Paul Salopek (left) and photographer Kuni Takahashi traveled to the distant sources of the South Elgin Marathon’s gas. http://www.chicagotribune.com/news/specials/chi-oil-about-story,0,7014967.htmlstory

Chapter 1: The pay zone A Marathon station in South Elgin, Ill., serves as an ideal prism to examine the coming end of the oil age. http://www.chicagotribune.com/chi-oil-1-story,0,2482956.htmlstory

Chapter 2: The frontier Americans have hitched their 210 million autos to Africa, forcing the planet’s last superpower to rattle its half-empty oilcan at the world’s poorest continent. http://www.chicagotribune.com/chi-oil-2-story,0,2941709.htmlstory

Chapter 3: The war The hidden costs of our oil addiction include everything from U.S. job losses to the medical bills of American troops wounded in Iraq. http://www.chicagotribune.com/news/specials/chi-oil-3-story,0,80570.htmlstory

Chapter 4: Last call An energy cold war over oil threatens to become the defining struggle of the 21st Century. An early flash point: the United States and Hugo Chavez’s Venezuela. http://www.chicagotribune.com/news/specials/chi-oil-4-story,0,539323.htmlstory

Copyright © 2006, Chicago Tribune

International oil giant Shell will make its final decision on whether to invest in Phase 13 of South Pars gas field development project in 2007. Mullahs’ Managing Director of Pars Oil and Gas Company Akbar Torkan said the final investment decision (FID) on Phase 13 of South Pars gas field which pertains to Shell will be made available next year, adding that the FID on Phase 11 will also be available at the end of this year.

He said that based on talks with the managing director of Shell, the company is not going to finalize its decision on investment in Phase 13 this year, however, according to the plan, the company is expected to make its final investment decision in 2007 instead.

“There are no obstacles to the development of Phase 13 whose contract has already been inked and approved by Shell.”

On signing a contract with Total to develop Phase 11, Torkan said that initial measures have been taken to sign the contract with the French company. “At the moment, both Total and National Iranian Oil Company are finalizing the contract.”

© Iranian.ws

EXTRACT: The market was still feeling the ramifications after Royal Dutch Shell declared force majeure on crude deliveries from Nigeria’s Bonny oilfield for this month and next. The move means contracts might not be honored during those two months.

THE ARTICLE

AFP , NEW YORK
Sunday, Jul 30, 2006,Page 10

Advertising Oil prices slumped on Friday following news of slower economic growth in the US, which prompted fears for demand in the world’s biggest consumer of energy, traders said.

New York’s main contract, light sweet crude for delivery in September, plunged US$1.30 to close at US$73.24 a barrel.

In London, Brent North Sea crude for September delivery sank to US$73.39 a barrel, down US$1.62 from Thursday’s settlement. US economic growth slowed to just 2.5 percent in the three months to last month, government data showed on Friday, as consumers turned nervous in the face of sky-high fuel prices and a cooling property market.

The weak data “reflects a depressed consumption, which is usually contributing to lower prices because it could lead to a fall in the US demand for gas [gasoline],” said AG Edwards analyst Bill O’Grady.

The Commerce Department said that gross domestic product growth in the second quarter decelerated sharply from the blistering pace of 5.6 percent recorded over January-March.

The figure was also much worse than Wall Street’s second-quarter forecast of 3.0 percent.

“I think the GDP data contributed to the [oil price] falls,” said Man Financial analyst Andy Lebow. “The market was soft before that but the GDP data accelerated the sell-off.”

However, losses were limited by supply concerns in Nigeria as well as tensions in the Middle East.

Prices are winning some support from “a combination of Nigeria’s disruptions and the latest US inventory report which had quite a large drop in gasoline stocks and not much movement on the crude front,” Global Insight analyst Simon Wardell said. “And the market is reacting to the situation in the Middle East.”

The market was still feeling the ramifications after Royal Dutch Shell declared force majeure on crude deliveries from Nigeria’s Bonny oilfield for this month and next. The move means contracts might not be honored during those two months.

The Anglo-Dutch giant declared force majeure after a leak in an oil pipeline in southern Nigeria cut output by 180,000 barrels per day.

Disruptions blamed on unrest in the Niger Delta have brought Nigeria’s total production loss to 675,000 barrels per day, or 26 percent of the country’s normal daily output.

Tobin Gorey, commodities strategist at the Commonwealth Bank of Australia in Sydney, added that tensions over Iran were also “a big part” of why oil prices have remained above US$70.

Six major powers held a meeting on Iran’s nuclear program on Thursday and came closer to agreeing on a resolution to put to the UN Security Council, diplomats said.

The council’s permanent members — Britain, China, France, Russia and US — plus Germany agreed to send the latest draft resolutions back to their governments.

The draft aims to force Iran to cease uranium enrichment, which can be used to make nuclear weapons. Iran says its atomic program is for peaceful energy purposes.

Iran is also a strong backer of the militant Islamic group Hezbollah which is fighting Israel troops in Lebanon.