John Browne on the Future of Energy

The former BP chief talks about rising energy prices and other challenges, and recommends a set of principles for the industry in its new era

John Browne, who was chief executive of BP PLC (BP) for 12 years, was the first head of a major oil company to acknowledge that climate change is a serious problem. Browne, who left BP in May, is now European managing partner of Riverstone Holdings, a New York-based private equity firm that focuses on energy. At Riverstone, he will be involved in both alternative and conventional energy investments (BusinessWeek.com, 10/17/07).

Lord Browne's Nov. 21 talk at BusinessWeek's European Leadership Forum in London made very clear that his passion for finding ways to reduce carbon emissions and, indeed, for the whole energy field remains very much alive. He even confessed to reading reports by the International Energy Agency, the consumer countries' watchdog, at night.

He suggested that despite the uncertainty, business can make progress in the energy arena by following certain principles, or "beacons": flexibility, collaboration, energy efficiency, and what he described as "making carbon mainstream," including "putting in place the kind of aggressive carbon legislation that is needed."

— Stanley Reed

Ladies and gentlemen, good afternoon.

During the 40 years I have spent in the energy business, I have lived through at least three periods of change and uncertainty, when the rules of the game shifted:

First, there was the rise of OPEC in the 1970s, when those of us in the Seven Sisters had no choice but to pack our bags and start exploring back home; then there was the surge of oil from Alaska and the North Sea in the 1980s; and then there is the last few years, when strong demand and lack of investment have contributed to OPEC gaining a more powerful position once more.

And what next?

I believe we are entering another period of energy dislocation today—and it is probably the most significant moment of change I've seen in my career so far.

I am struck by the degree of uncertainty and complexity surrounding us at present. I am also struck by the sheer number of new actors now appearing on the energy stage.

In the business world, energy has become a strategic issue for companies in almost every sector in the past few years. Rising energy prices, changing energy regulations and growing consumer demand for green products and services are matters of concern to us all. It is important to explain what is going on. But I believe we are currently long on analysis and short on recommendations about what business should do in response.

I think a nautical metaphor may be appropriate here. We are sailing into unknown and choppy seas. There is a maelstrom of currents, which of course we must try to understand and anticipate. But we also need beacons—fixed points that help us to navigate.

I believe there are four beacons that business leaders should keep in mind when navigating in today's new energy world.

But first, the currents that are swirling around us.…There are almost as many ways of analysing today's period of energy change as there are analysts. My own preferred approach is to look at four trends that have come together in recent years.