When Bob Dudley became BP’s chief executive in 2010 he faced a political and public backlash in the US after the deadly Gulf of Mexico blowout. He had to bring the energy major back from the brink of collapse and secure its societal licence to operate.
Nearly a decade on, as he hands over a revived company to Bernard Looney, BP’s long-term survival is once again under scrutiny amid pressure to act on climate change – a challenge that the entire oil and gas industry is grappling with.
“Bob steered BP through a difficult time that is unprecedented in the last 30 years. The situation BP faced was unique to the company,” said Jason Gammel, energy analyst at Jefferies. “Now Bernard faces a set of choices that all of its peers also have.”
After managing the Deepwater Horizon disaster, the fractious break-up of the TNK-BP joint venture in Russia and the oil price crash of 2014, Mr Dudley focused on the “dual challenge” of providing the world with more energy while dramatically reducing emissions.
However, it is his successor who must spell out what this means for BP’s corporate strategy.
The pressure is mounting. Shareholders are demanding BP take greater action on climate change, Greenpeace activists this year scaled one of its North Sea oil rigs and shut down its London headquarters. BP’s funding of the arts is also under scrutiny.
Yet most investors are still enticed by the dividends BP generates. And while oil companies are becoming social pariahs in Europe, in Africa and Asia, where demand for hydrocarbons is accelerating, they are still embraced.
Mr Looney, a 49-year-old Irishman with a reputation as a strategic thinker, will need to decide which direction to take the energy major as it prepares its next five-year strategy beginning in 2021.
Since claims from the Gulf of Mexico disaster have fallen, BP has a more robust balance sheet and has weighed cash generated from its businesses and divestment proceeds with capital spending, dividends and buybacks. Mr Looney has helped deliver higher production and running projects more efficiently.
BP reported earnings of $12.7bn in 2018, as high as when oil was trading closer to $100 a barrel, compared with $6.2bn in 2017.
BP has invested in wind farms, solar power, biofuels and low-carbon start-ups but returns from these businesses do not match its core oil-drilling division.
“Does BP stay as Big Oil or does it become Big Energy – diversifying into power and renewables in a meaningful way. It feels like BP right now is on the fence,” said Ed Crooks at consultancy Wood Mackenzie.
Mr Looney, a BP lifer, was formally selected at a board meeting on Thursday triumphing over chief financial officer Brian Gilvary. External candidates were considered, but Mr Looney had long been tipped for the post.
Since 2016 he has headed BP’s exploration and production business after operational roles around the world. Identified early on as a rising star, he was made an executive assistant, or “turtle”, to John Browne when he was chief executive, named after the Teenage Mutant Ninja Turtles who were on hand whenever help was needed. He also worked under Tony Hayward.
When oil gushed into the Gulf of Mexico from the Deepwater Horizon rig, Mr Looney was flown to Houston to help. “It was, without doubt, the most challenging time of my career,” he told the Irish Independent newspaper last year.
More recently, he has taken BP into new regions and clinched a deal for mining group BHP’s US shale assets for $10.5bn in 2018 – BP’s biggest in 20 years. It primed the company for growth, but some industry executives have criticised it as too expensive.
“He never talked about it a lot, but it was very clear that his ambition was to run BP,” said a person who has known Mr Looney for decades. “The issue on his watch will be how BP engages with the energy transition in a substantive way, which most people would say so far they have been paying lip service to.”
Unlike peers Royal Dutch Shell and Total, which are banking on low-carbon electricity, BP has been more cautious given the failure of its “Beyond Petroleum” renewables drive in the 2000s. Paying out tens of billions of dollars in clean-up fines for the Gulf of Mexico spill also engendered a sense of caution in the group, making it reluctant to take any particular pathway.
But BP knows it needs to go further. “We are in a fundamentally new era,” said a BP insider familiar with the succession process.
Tech-savvy Mr Looney is seen as an energetic and fresher face to guide the company and its next generation of employees through this uncertain future.
Mr Looney grew up on a farm in Kerry and was the first in his family to go to university. He is widely liked and respected, and BP was seeking a “modern” leadership style, far removed from the autocratic tough guy approach that dominates the oil industry, said a person familiar with the thinking of BP’s board.
He demands the best of people but is aware of his own shortcomings. Tall and statesmanlike, yet personable, he is also liked by investors and rivals.
“Bernard has remained humble even as he has risen up the ladder,” said a colleague who knows him well. “He’s the same person he was 25 years ago.”
For Mr Looney, as long as BP produces the hydrocarbons the world requires, it needs to improve the efficiency of these operations by reducing costs, project timelines and embracing technology.
He told offshore oil industry veterans in Aberdeen last month that to survive and thrive in a world where oil demand plateaus, “modernisation and efficiency will help keep us at the top of the industry – and ensure our barrels find a market”, adding: “We all have to go further and faster.”
Helge Lund, BP’s new chairman, will be a key partner for Mr Looney.
Mr Lund, while seeing himself as a light-touch coach and strategist, has already made apparent his intentions for the company’s future. “Our evolution into broader energy companies would require us to create new carbon-neutral businesses at an unprecedented rate and to transform existing businesses,” he wrote in an opinion piece for the FT.
But what this transformation at BP looks like remains unclear.
Shareholders are demanding greater disclosure about how its existing business and future investment plans align with the Paris climate goals. BP has also come under fire for its membership of industry groups that have lobbied to weaken environmental regulations and been criticised for not taking responsibility for the emissions released from the fuels its customers burn, such as petrol and diesel in cars.
“We hope a new CEO will create room for BP to commit to the Paris Climate Agreement by assuming responsibility for product emissions, something Bob Dudley was firmly against,” said Mark van Baal, founder of activist investor group Follow This.
After Mr Dudley’s appointment, there was a feeling he took too long to get investors onside because he was cautious about making promises he could not deliver on, two company insiders said.
Mr Looney may face the same dilemma and this time the range of stakeholders to placate is broader and their opinions more divergent.
One confidant of Mr Looney said: “The energy transition will play out at varying paces in different parts of the world. This is the challenge Bernard will have to navigate.”
Additional reporting by Neil Hume