BP chairman says energy industry is thrust into globalization debate

Oct. 23, 2001
Peter Sutherland, BP PLC chairman, has told the World Energy Congress the oil industry must continue to play a key role in world trade and economic growth.

Bob Williams
Executive Editor
Oil and Gas Journal

BUENOS AIRES — The energy business has been thrust into the forefront of the debate over globalization, the chairman of BP PLC told the 18th World Energy Congress here.

Peter Sutherland not only stressed the energy industry's critical role in the spread of world trade and economic growth but also charged his listeners with recognizing that the energy industry has a moral imperative to further such trade objectives.

Sutherland also emphasized the continuing importance of oil and gas in meeting the growing energy demands of the world in the decades to come. He linked the continuing dominant role of hydrocarbon use to the global efforts toward bolstering the economies of developing nations and bettering the lives of the world's impoverished peoples.

He made the comments in the opening keynote address via video conference from the UK. WEC attendance was expected to top 5,000 delegates in a conference marked by extremely heavy security measures in the wake of recent terrorist attacks on the US.

Fitting the theme of the globalization of energy and its impacts on developing nations, an official of the Philippines energy sector was named chairman of the World Energy Council, the multinational, multi-energy organization that hosts the annual congress. Taking over WEC reins is Antonio del Rosario, who is the first WEC chairman from a developing nation. He is president and CEO of Trans-Asia Oil & Energy Development Corp., Trans-Asia Power Generation, and Asia Coal Corp., all based in the Philippines. Del Rosario previously held posts with Philippine National Oil Co. and the Philippine Ministry of Energy.

Globalization importance

"An economic outlook that was already uncertain before [the terrorist attacks of] Sept. 11 has become even more so since then," Sutherland said.

The nonexecutive chairman of BP noted that concerns over the state of the global economy have added significance to any decisions from the upcoming round of World Trade Organization talks in Doha, Qatar, in November.

"It has never been more important," Sutherland said, to create a "single, indivisible economy," regardless of the opposition to the WTO round and globalization efforts.

"The energy business has been thrust into the forefront of the debate over globalization," Sutherland noted, explaining that energy use remains inextricably tied to improving levels of gross domestic product among the developing nations of the world.

Oil, gas demand growth

In order to meet the energy needs of the estimated 6-7 billion global population expected by 2010, oil demand will have to rise to 90 million b/d from the current level of 77 million b/d, and natural gas demand will have to rise to 280 bcfd from 220 bcfd today.

By 2010, oil and gas will hold a two-thirds market share of global energy demand, and that share will increase, Sutherland asserted: "To be in denial of this fact is a major mistake."

Natural gas demand growth will account for most of that incremental market share growth, he noted, adding that the fuel now accounts for 40% of BP's production, up from 15% only a decade ago.

At the same time, while conservation and renewable fuels development efforts continue to make inroads, they will fall short of the mark in meeting global energy demand needs, Sutherland said.

Even while BP has invested more than $200 million in photovoltaics to carve out a niche in the growing solar energy sector, "...the time frame for renewables to develop a significant share of the world's energy supplies is probably 30-40 years."

He also noted that, for every 1% improvement in energy efficiency, the corresponding rein on total energy use limits that growth to less than 4%/year.

"[The world] has 40 years of oil reserves life and 60 years of gas; the challenge is to use it wisely."

Industry's role

In considering the role of the energy industry in mitigating the environmental effects of energy development and use, Sutherland claimed that multinational companies "are exactly the means by which best practices in energy development can spread."

Even in the short term, the use of clean fuels can make a difference, he said, noting that BP has reduced its emissions of gases linked to purported climate change by 10% during 1990-2000.

Sutherland also cited the "extraordinary developments" in technology in supporting the search for new hydrocarbon reserves, estimating that the cost of finding oil and gas has plunged to less than $4/boe from $6-8/boe during the 1980s.

Globalization importance

Sutherland took issue with assertions by opponents of globalization that increasing energy use necessarily damages the environment, instead insisting that overall environmental degradation can be lessened by the economic uplift that comes with expanded energy consumption.

Sutherland blasted the antiglobalization movement itself as a principal threat to efforts to improve the welfare of populations in developing countries, rather than accepting the movement's central thesis that the spread of global trade worsens their plight.

"This is a damaging concept, because the reverse is true," he said. "It is unrealistic and unfair and morally wrong to suggest that [by curbing growth in energy use], developed countries should pull up the rope ladder behind them so that developing countries cannot share in economic growth," he said.

"The system of multilateral trade needs to be defended more strongly than ever," Sutherland said, refuting claims that globalization "has failed to live up to its promises."

"That's not true at all. There have been demonstrable benefits [from globalization], Sutherland said, citing evidence that the poorest one fifth of the world's nations have benefited the most from increases in global trade.

"Those who have not benefited from [globalization] have avoided it or even put up barriers to protect local industries," he added.

Noting that the proportion of the world's people living in "absolute poverty" -- living on less than $1/day -- totals 1.5 billion, Sutherland said, "This is not being caused by the opening of trade, but by its denial."

Moral imperative

Sutherland continued to hammer home the notion that the energy industry has a moral obligation to assist in efforts to further the expansion of trade and business opportunities.

Noting the growing "demonization" of the energy industry, he observed that "energy businesses are being drawn into an increasingly controversial role" in the globalization debate.

"The energy business must stand up for itself," Sutherland charged, taking issue with the antiglobalist stance that underlies what he calls "the precautionary principle" on sustainable development -- which he likens to "Ban first, think later."

"This approach slams the brakes on economic development," he said.

Economic growth depends more than ever on the global spread of technology, Sutherland claimed, claiming that technological progress accounts for one half to two thirds of the growth in economic benefits around the world.

"It isn't the easiest of times to try to marry growth in trade and technology," Sutherland said, but he charged the energy industry with standing "at the front lines of advocating the spread of technology and trade," even as antiglobalist protestors continue to "demonize" the energy business.

"Whatever benefits globalization brings can and should be defended," he concluded, charging the energy industry with taking up the struggle to defend the spread of trade and technology and the growth in energy use. "There are more than just business interests at stake."