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Sunday Times: Business Letters

May 13, 2007

Oil titans: In last week’s Business Focus you claimed that Browne transformed BP from an also-ran into one of the titans of the oil world.

If you look at Schindler and Zittel’s analysis of Exxon Mobil, Shell and BP in Analysis of the Annual Reports of the Oil Majors, which I translated, you’ll see all three “titans” have cut their exploration spending and have instead bought back their own shares. You will also see that none of the three managed to replace its spent oil reserves.

The “booked” reserves of all three have been built up mainly by acquisition. In the case of BP this has been mainly in TNK in Russia. Browne is quoted as saying “One will never know how much [oil] there is …”, but from where the money has been put he clearly thinks it is mostly to be found in existing fields, rather than in areas yet to be explored.

The problems with the Thunder Horse platform are ample justification for his policy, but it leaves BP at the mercy of a relationship with Putin.

Shell has suffered from this policy, losing 9% of booked reserves over the Sakhalin ownership adjustment.

It is clear that the three titans are failing hunter-gatherers unable to hunt for their spoil, but need to treat with neighbouring tribes for survival. Browne’s expertise was right for the last years of the Sun King’s reign, but something different is needed now.

John Busby, Bury St, Edmunds

http://business.timesonline.co.uk/tol/business/economics/article1781511.ece

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