The giant has slimmed down, come to grips with the recession, taken
the hardest decisions -- and now chief executive
Chris Gibson-Smith has a confident air when he talks of BP
Exploration's future linked to that of the North Sea
MENTION oil and the response of most people would be ''rich'' -- the
two go together like peaches and cream. But Chris Gibson-Smith quickly
reminds you that oil prices have been falling for 12 years.
Today's price of $18 is worth 60 per
cent less than in real value than it was 10 years ago and BP
Exploration has been forced to slim down to cope with this fall in
price.
However, Chris Gibson-Smith -- a Geordie without the accent -- is
confident that the oil giant ''can live with'' the new lower price.
''We have been repositioning ourselves over the past three years,''
says the oilman, ''and in 1992 we came to grips with the recession. The
hardest decisions have been taken.''
Despite the slimming-down exercise,
BP Exploration is still a giant in non-oil terms with a #4bn annual
turnover in the UK. In addition to the 7000 workers it
employs directly in Scotland, BP supports
a further 60,000 jobs among suppliers
and contractors.
Its importance to the Scottish economy
will be demonstrated later this year when it places two #400m
contracts for the construction work for the Forth and Andrew fields.
Chris Gibson-Smith has a confident air when he talks of his company's
future linked to the North Sea:
''We can see ahead for the next 10 years. North Sea oil will be here
in 25 years' time and in 10 years' time the industry will be the same
size as it is today. There is still the same discovery rate of new
fields in the North Sea -- though they are smaller.''
The development of offshore technology and the new style management
approach by BP means that many smaller fields which were previously
uneconomic are now being developed.
The oil chief executive who started work in the industry
as a geologist, points out:
''Three years ago Forth and Andrew were uneconomic but we looked at
new ways of
developing them and our
own costs. We are still act
ively looking at the Claire
field west of Shetlands and
hope we can do something there.''
To continue as a major
oil exploration arena, the North Sea must remain competitive, he says,
to prevent other offshore areas -- such as Vietnam -- attracting the
investment cash available to oil companies.
It is estimated that almost #400b will be spent between 1991 and 1995
on offshore oil exploration with no less than #36bn of this being spent
in the North Sea.
Gibson-Smith believes that, handled properly, Scotland's oil industry
could grab a share of this lucrative market.
''Let's get up to global standards and have Scotland as a centre of
oil expertise on a world-wide scale,'' he says. ''We are working to
promote that and are beginning to bring Scotland up to world
standards.''
The big threat to the industry, according to the oil executive, is
that the price of oil continues to fall.
Government policy and attitude towards the industry is also ''very
important'', he says. ''We are heavily taxed and regulated. Every action
we take requires some Government department to make a decision, though
there is
an enormous push to speed
up the Government's decision-making.''
The real change the BP executive wants the Government to make is the
removal of the ring fence around the North Sea -- which prevents oil
companies off-setting losses made elsewhere against profits made in the
UK sector.
Petroleum Revenue Tax, he points out, takes 75 per cent of the revenue
from large fields and, since oil began flowing in the North Sea, the
Government has raked in #75bm from this tax.
The Government policy decisions in the gas-v-coal debate will also
have an impact on BP Exploration. ''We don't know the effect of any
Government decisions,'' says Gibson-Smith, ''but we have around 50 gas
projects planned over the next five years and if any of these is set
back, there could be an adverse effect on jobs.
''We expect each project to provide between two and three thousand
jobs. The case is clear. Coal is not an economic competitor but the
issue is
a social one. It is a case
of two great industries rebalancing.''
His industry will probably see a further shake-out of jobs, according
to Gibson-Smith; while those offshore will probably be secure, there
could be pressure on the number of jobs at Grangemouth.
There could also be more movement in the jobs market if BP's
competitors follow its example of working closer with their contractors.
''We now profit-share with our contractors,'' says Gibson-Smith. ''If
for example we agree together that a job will cost #10m and the
contractor manages to complete it for #9m, then we share the difference
with them.
''The new relationship also means that where we would once have 30 or
40 managers on a contract, we now only have three or four; but the
contractors employ more.''
BP's new, open management approach does not extend to new
explorations.
The Gibson-Smith eyes take on a glassy look when he is pressed on his
views about the sector west of Shetlands, which is still largely
unexplored. He will only say: ''I like the western margins as a
province. Yes, I do.''
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article