Читать книгу The Squeeze: Oil, Money and Greed in the 21st Century - Tom Bower - Страница 10

John Browne understood oil better than most. Shell’s Mark Moody-Stuart, Chevron’s David O’Reilly and Exxon’s Lee Raymond could not match Browne’s intellect and bravado, but none had as much to prove. Employed by BP since leaving Cambridge University, the son of a BP executive who had met his Romanian mother, a survivor of Auschwitz, in post-war Germany, Browne understood that trouble and taboos had been inherent within BP since its creation. During his youth he had lived with his parents in Iran and had witnessed the company’s arrogance and subsequent humiliation. The industry’s rollercoastering battles ever since encouraged his taste for audacious gambles to rebuild a conglomerate lacking geographical logic and natural roots.

BP was founded on disobedience and survived by maverick deeds. The original sinner was William Knox D’Arcy, a wealthy Australian who arrived in Persia in 1901 on a hunch that oil could be discovered there. D’Arcy negotiated a 60-year concession over 480,000 square miles of desert. For seven years his team drilled unsuccessfully across an area twice the size of Texas, until in 1908 he was ordered by Burmah Oil, a Scottish investor, to stop. Having started yet another test bore D’Arcy’s team ignored the message and, detecting a strong smell of gas, struck oil. There was no natural reason why that fortuitous discovery should have evolved into the formation of a famous company. Culturally, the directors of the new Anglo-Persian Oil Company based in Glasgow were embarrassingly ignorant about their faraway asset. In contrast to the American oil companies which had spawned an integrated market built on discoveries in Texas and across the prairies, Anglo-Persian, which became BP, was a colonial concession sponsored by the British government. Managed by retired military officers recruited particularly from the Indian army, its staff clung to their suzerainty. Amateurs in marketing and untrained to supervise refineries and chemical industries, they aspired to be gentlemen, and were generally indifferent to indigenous politicians, especially Arabs and Iranians, whom they regarded as inferior. Unlike Shell’s country chairmen, soaked in local cultures and enjoying rapport with host governments, BP’s managers carelessly alienated their hosts, offhandedly oblivious of Iraq’s and Iran’s vast oil wealth.

Little changed before the nationalisation of BP’s oilfields in Iraq in 1951. Sir Eric Drake, the corporation’s conceited chairman, assumed that the confiscation would be compensated by increasing oil prices and the discovery of new reserves in Libya, Nigeria and Abu Dhabi, or by expanding into petrochemicals and shipping. Over the next 20 years, BP balanced the escalating demands of the Shah of Iran, the bellicosity of OPEC and Arab nationalism, especially in Libya, by finding new oil in Alaska in 1968 and the North Sea in 1970. The problem was the directors’ lack of commitment to exploration. The discovery of a new field, noted the exploration department in 1971, evoked the reaction, ‘What on earth are we going to do with all this oil?’ Terry Adams, BP’s director in Abu Dhabi, was expected to embody that casual attitude. To finance a pipeline in Alaska, Adams was ordered in early 1973 to sell half of BP’s share in Abu Dhabi’s offshore interests to a Japanese company for $736 million. ‘This is top secret, none of the locals need to know,’ BP’s manager Roger Bexon told him, referring to Sheikh Zaid, the leader of the state. In his anger after the sale was announced, Sheikh Zaid nationalised half of the Anglo-Japanese investment. The Japanese never believed that BP was unaware of the impending confiscation, and the Abu Dhabians griped about BP’s lack of respect. Insouciantly, the British pleaded ignorance, underestimating the profoundly negative consequence of their arrogance.

Arab irritation compounded BP’s problems in the region after the 1973 war. In succession, the company’s oilfields in Kuwait and Libya were nationalised. Overnight, BP’s plight was dire; the company had become entirely dependent on the discovery of oil in Alaska and imminent production in the North Sea, and it had fallen in rank from membership of the Big Three to seventh among the Seven Sisters. Morale was flagging, and there were even fears that BP faced extinction. Unlike the precise management processes at Chevron, Mobil and Exxon, which ran in harmony regardless of the identity of the individual chief executive, BP’s direction depended upon the chairman’s vision. ‘There are no sacred cows,’ declared Peter Walters, appointed chairman in 1981, who advocated retrenchment. BP’s focus was to be entirely oil. Following Exxon and Shell, Walters slowly reversed the diversification into non-oil businesses and ordered a $6 billion sale of all the nutrition manufacturers and mineral interests. He seemed unable to do much more to salvage the company from the morass. Impaired by the British government’s nonchalance, BP was crippled by debts, aggravated by the government’s order to repurchase about 10 per cent of the company’s shares from the Kuwaiti government which had been bought during a disastrous flotation. In an industry dominated by Exxon and Shell, BP had hit the buffers, destabilised by debt. Walters never recovered his self-confidence.

Two BP directors in America regarded Walters’s cuts and style as merely scratching the surface rather than offering a revolution. In 1983, Bob Horton, a brash 46-year-old fellow of the Massachusetts Institute of Technology, and his 35-year-old deputy John Browne had arrived at BP’s American headquarters in Cleveland, Ohio, to supervise BP’s 54 per cent investment in Sohio, the successor to the Standard Oil Company of Ohio, the original John D. Rockefeller corporation. The purchase had given BP an entrée into Alaska, but London had failed to prevent the American directors buying a copper-mining company, wasting $6 billion of Alaskan profits. ‘Sohio’s completely out of control,’ exclaimed Horton. ‘They’re losing $1 billion a year.’ Originally acquired in 1970, Sohio was Horton’s platform to prove his credentials as Walters’s successor. As head of BP chemicals in 1980, he had closed 20 plants and fired two thirds of the workforce. The cure at Sohio in May 1987 was to buy total ownership for $7.9 billion (£2.5 billion) and dismiss swathes of staff. Sohio, Horton and Browne proudly announced, would earn profits of $560 million within two years. Renamed BP America, it represented 53 per cent of BP’s total assets. From Ohio, the warts of BP’s culture in London were glaring. Deprived of courage, hope and energy, BP could only be resuscitated if the employees’ historical aversion to risk was replaced by American entrepreneurship. Their successful remedy in Cleveland, Horton and Browne decided, should be applied to the whole company after they returned to London in 1989.

Like most oil men, Horton and Browne believed in 1989 that ‘demand had peaked’, and oil would remain cheap because high prices stunted demand. Exxon, Mobil, Chevron and other more powerful competitors argued that prices were unpredictable, and survival depended upon cutting costs. Horton encouraged Walters to follow the herd. ‘BP cannot survive with this culture,’ he told Walters after listing eleven layers of management. ‘It’s sclerotic. Get rid of the brigadier belt. Too many have a vested interest to sabotage change.’ Starting from scratch, said Horton, BP needed to be repositioned and to duplicate Shell’s ‘wonderful worldwide brand’. Browne, as the new chief executive of exploration, echoed that criticism. In June 1989 he commissioned a presentation for investors in London and at the Rockefeller Center in New York. ‘This is dreadful,’ he said after previewing the slides. ‘We’re declining.’ BP’s access to 70 billion barrels of reserves had dropped to four billion, and were not being replaced. Production was falling from 1.5 million barrels a day to below one million. While its rival Shell had successfully retained profitable oil and gas fields in Nigeria, Oman, Malaysia, Brunei and Holland, BP would go out of business unless it found new, big prospects. Tom Hamilton, the American chief for international exploration, was told by Browne to present a scenario for a new strategy. ‘I’m going away with my family on holiday,’ explained Hamilton. ‘Take the company plane and come back early,’ ordered Browne. ‘I’ll need 90 days to do it,’ replied Hamilton. ‘You’ve got three days to calculate the best odds to discover more oil,’ replied Browne. In September 1989, Browne commissioned new exploration operations in Yemen, Ethiopia, Vietnam, Angola, Gabon, Congo, South Korea and the Gulf of Mexico.

Few doubted the need for brutal surgery. Peter Walters’s retirement in early 1990 provided the opportunity for change. Persuaded by Bob Horton’s presentation about his achievements and by his argument in favour of a cultural revolution, the board unanimously picked ‘Horton the Hatchet’ as BP’s new chairman and chief executive. ‘Project 1990,’ said Horton, ‘is my personal crusade to revolutionise the company.’ Twelve thousand employees would be dismissed and $7 billion of assets sold. Horton espoused drama as a resolution to the crisis.

Eighty-two committees at BP’s London headquarters in Finsbury Square were axed, leaving just four. The eleven layers of management were also reduced to four. To inspire enthusiasm and to reincarnate BP’s 120,000 staff as open-minded and freethinking, Horton participated in ‘cultural change workshops’ with 40 senior staff to discuss the ‘new vision and values’. His propagandists praised ‘the terrific buzz which motivated us to get the change moving’, but others carped that the balance between pain and progress was wrong. Horton had chosen Jack Welch’s operation at General Electric as his model for a centralised, focused corporation. In the oil business, no one could ignore Lawrence Rawl, the chairman of Exxon. Although Exxon was, in Horton’s opinion, ‘wildly overmanned and too engineer- and lawyer-led’, Rawl consistently produced successful results. Horton’s public predictions, accompanying jerky attempts to build solid corporate foundations, compared poorly with Rawl’s rare but pertinent statements about Exxon’s unflustered deliberations. As oil prices gyrated in late 1990 from $40 down to $31, Rawl cautioned that uncertainty made investment decisions difficult: ‘This is a long-term business. We cannot turn the money off and on every time someone clears his throat in the Middle East or elsewhere as the price goes up and down.’

The ‘cough’ was Iraq’s invasion of Kuwait in August 1990. America’s oil industry was still struggling. Oil production had fallen every year since 1986 by between 2.5 and 6.5 per cent. Banks remained reluctant to lend because of the continuing uncertainties. The oil business, it was said, was as safe as rolling dice in Las Vegas. Even Exxon lacked sufficient money and personnel to instantly boost production. The US government offered no leadership to fashion a new energy policy. In 1988 America had believed that George Bush Snr was the oil industry’s dream candidate, although as Ronald Reagan’s vice president he had offered it no help, and he had in fact campaigned for the presidency as an environmentalist. During his single term, Bush would dilute an Energy Bill giving the industry minor tax relief, would not limit imports, and would cancel the sale of eight offshore leases. Texans, surrounded by abandoned derricks, were angry that the president sent the army to Kuwait out of fear of losing 1.5 million barrels of oil a day, but that no one appeared to care about Texas’s similar losses since 1986. Their anger spread to contempt for east coast liberals and Californian environmentalists who nevertheless still harboured a sense of entitlement that energy should be abundant and cheap. Hoping for a cautious recovery from that economic devastation, Horton concluded that ‘the fundamental realities point to higher oil prices’. BP, he decided, needed to change fast.

The hyperactive Horton lacked Rawl’s gravitas. He misunderstood Exxon’s foundations, created in around 1865, and built on vast untapped reserves of oil. Ever since John D. Rockefeller’s retirement in 1897, the corporation had been led by domineering personalities moulded by Exxon’s character and caution. Unlike that prototype, Horton was not fashioning himself as a conservative, sober, confident chieftain, but was duplicating the caricature of a brash American chief executive. After four years in Cleveland, he had forgotten that BP was a British Boys’ Club, uniting in a collegiate atmosphere people who had lived, worked and played together for 25 years. Running too fast, he was failing to implement his own plans. Instead of focusing on the cuts, he ordered BP to expand despite the continued recession. At a time when the price of oil was about $16 a barrel and slipping, he expected that it would rise to $21 or even $25. Convinced of his own genius, he welcomed personal publicity. Impulsive and careless with his language, he told the first journalist invited into his office: ‘I’m afraid because I am blessed by my good brain which is in advance of my colleagues’, I tend to get to the right answer rather quicker and more often than most people.’ (He would forever regret this remark: ‘It came out wrong, and I have had it hung round my neck ever since – never ever did I think I was a genius, far from it.’) The cover of Management Today featured Horton holding a hatchet, while Forbes magazine photographed him sitting on a throne. There was gossip within BP’s headquarters about Horton asking his secretary, ‘Should I go to a charm school?’ His insensitivity bewildered his colleagues. Newspapers began reporting Horton’s unpopularity, one asking: ‘When Robert Horton and his wife return from their holiday in Turkey, many BP staff will hope that their plane will crash.’ David Simon, a managing director, was told that Horton concealed such criticisms from his mother. ‘Good God,’ exclaimed Simon. ‘Horton has a mother!’ Another executive told Horton to his face, ‘Why don’t you bugger off to Chessington Zoo and watch the gorillas and monkeys?’ ‘Why?’ asked Horton. ‘Because you might learn a lot.’

Relations between Horton and his fellow directors were not improved after they arrived at Heathrow airport on 23 June 1992 to fly to Alaska for a board meeting. Horton was overheard having an unseemly argument with the BA employee at the check-in desk. The atmosphere at the board meeting was fractious. BP would record its first quarterly net loss of £650 million ($1.24 billion) after its income fell by 82 per cent, compared to a £415 million profit in 1991. The debt had increased to $16 billion and the share price had slid from 332 pence in June 1990 to 209 in June 1992. ‘We’re bleeding cash like crazy,’ said one director, querying why the proposed cuts had not materialised, especially at the refineries. ‘You can count on BP’s DNA to find an inspired route out of the trouble,’ countered a Horton sympathiser, only to be crushed by another director: ‘Exxon and Chevron don’t get into trouble.’ Oblivious to the storm, Horton insisted during the board meeting that BP should pay a normal dividend to please investors. ‘Could you wait outside?’ he was asked by the banker Lord Ashburton. Beyond his hearing, the reckoning was swift. ‘He’s spent too much time with ambassadors and playing politics in Washington,’ said one voice. ‘And he’s spent too little time on the details of the business,’ added another. ‘Bob is ambitious, abrasive and arrogant,’ concluded a third. ‘We need a change.’ The mood was summarised by Ashburton: ‘There’s been a build-up of small flakes which has become quite a lot of snow on the ground.’ Three weeks later the non-executive directors, including Ashburton and Peter Sutherland, met at Barings bank in the City on a Saturday morning to decide Horton’s fate.

The unsuspecting chief executive was summoned the following Wednesday. ‘Robert,’ said Ashburton, ‘the board has decided to ask for your resignation.’ ‘My God,’ exclaimed Horton, shocked that his fate was even being discussed. ‘I was brought down as laughable,’ he reflected. ‘I got a head of steam. My mistake was believing change could be done so fast. I should have shown more tenderness.’ The public announcement was stripped of any charitable sentiment. ‘Hatchet Horton’s’ decapitation matched the cultural change he had championed, except that his dismissal was interpreted by outsiders as the final collapse of a stodgy giant. BP, rival oil companies believed, would shortly be receiving the last rites.

Horton was replaced by David Simon, a trusted team player with expertise in refining and marketing. ‘This is about the style of running the company at the top,’ Simon said about his predecessor. ‘It’s not that I don’t have an ego. It’s just that it’s not terribly important to me.’ Simon, a cerebral linguist, acknowledged his limitations. ‘Look, chaps,’ he frequently smiled during meetings, ‘you know I’m not very bright, so could you explain this in simple language?’ Six weeks after Horton’s dismissal, BP halved its dividend. Horton’s intention to copy Exxon and centralise BP was reversed. Power was devolved to trusted subordinates who would be accountable to business units, an innovation introduced by McKinsey & Company, the management consultants. That suited John Browne, the head of exploration and production and the heir apparent. Although Browne’s admirers described an occasionally soft and lonely character, fond of ballet and opera and not inclined to socialise, he espoused confrontation to resolve problems. BP’s style, he believed, should not attempt to mimic Exxon’s. Hierarchies and conformity were to be destroyed, and to encourage initiative there would be informal lunches, no lofty titles, and meetings between forklift drivers and accountants. Outsiders were greeted by charm, but employees understood the ground rules of a self-styled alpha male: ‘One mistake and you’re out.’ His lesson from Sohio was the importance of consolidation and cuts.

‘I’m astute enough to know what I’m doing,’ Browne told Tom Hamilton. In 1991, after working with him for six years, Hamilton admired Browne’s negotiating skills and passion to reduce costs, but questioned his limited experience. In his early career Browne had chopped and changed between jobs, spending just nine months at the Forties field in the North Sea and the same amount of time in Prudhoe Bay, never staying long enough to see his mistakes emerge. Not only was his knowledge about operating in the mud and sand of oilfields superficial, but he lacked any taste for solving engineering problems. Working in an office filled with monitors displaying information to feed his appetite for facts, he concealed his limitations by obtaining detailed dossiers on every face and every issue in order to brief himself before meetings. Browne’s impressive ability to absorb information, Hamilton feared, produced blindness about the whole picture and an inability to anticipate what could go wrong.

That weakness, Hamilton believed, stemmed from Browne’s addiction to the wisdom handed down by McKinsey. Persuaded during his studies at Stanford in California that BP’s experts could be replaced by consultants, he appeared to become a financial executive surrounded by accountants focused on balance sheets to satisfy the shareholders, rather than harnessing engineering skills to manage a project. ‘To save money,’ Browne had argued, ‘we can buy in what we need.’ In Browne’s opinion, Hamilton did not understand the skill required to direct BP’s limited cash towards prospective windfalls. BP’s technicians, he felt, needed to be business-oriented. Making profits was his only criterion, whether by improved technology, lower costs, reduced interest payments or higher volumes. ‘The engineers in Aberdeen gold-plate everything,’ he complained. ‘They’re inefficient and wasteful.’ BP’s engineering headquarters at Sunbury, infamous for pioneering ‘space grease’ and constantly reinventing the wheel, was to be closed. Browne saw no incongruity in an oil and chemical corporation relying on hired freelance engineers. ‘If this goes wrong, John,’ Hamilton warned, ‘there’ll be no place in the world to run and hide.’

Browne’s conception of himself as a different kind of oil executive leading a different kind of oil company did not appeal to Hamilton. The final straw was an argument about cutting costs during an 18-hour flight to inspect an oilfield in Papua New Guinea. Browne’s antagonism towards BP’s traditional embrace of engineers irritated Hamilton. ‘We may have to turn back, John,’ he cautioned halfway through the helicopter flight across the jungle. ‘Cloud could prevent us landing.’ Just before they arrived, sunlight burst through the clouds. ‘So why so many problems?’ chided Browne. Hamilton resigned soon after, avoiding the profound change Browne demanded in exploration. Profits, said Browne, depended on cutting costs, especially exploration costs, by 50 per cent, from $10 to $5 a barrel, while at the same time finding enough new oil to start replacing BP’s depleting reserves in 1994.

Accurate forecasts of oil prices had become impossible after 1986. For the first time, prices were varying during a cycle of boom and bust. Conscious that the oil majors had invested too much during the 1960s, Browne pondered the revolutionisation of the industry’s finances. The new challenge was to balance the cost of exploration and production with the potential price of oil five years later. Oil companies, Browne knew, could only prosper if the cost of exploration and production matched market prices once the crude was transferred from the rocks to a pipeline. The yardstick for BP, the measure of future success, would be to equal Exxon, the industry’s most efficient operator. Exxon’s net income per barrel – the income divided by production – was about one third of BP’s. In costing all new projects, Browne ordered that regardless of whether oil prices were low or high, BP would only invest if profits were certain. With losses of £458 million in 1992, the new wisdom reflected BP’s plight. The corporation could not risk losing more money. If his plan was obeyed, Browne predicted, BP’s annual profits by 1996 would be $3 billion.

Predictions were also offered by McKinsey, which in 1992 forecast the atomisation of the major oil companies into small, nimble operators. The consultants foresaw excessive costs burdening the oil majors, restricting their operations. Too big and too expensive to run, they would give way to small private companies and the growing power of the national oil companies. By the end of the century, according to McKinsey, the Seven Sisters would shrink and their shares would no longer dominate the stock markets. Browne rejected that scenario, believing that only the majors could finance the exploration and production necessary to increase reserves. He would be proved partly wrong. Although the oil majors’ capitalisation in 2000 was 70 per cent of all quoted oil companies (McKinsey’s had predicted that their value would fall below 35 per cent in the stock markets), Browne was underestimating – albeit less than his rivals – the resurgence of nationalism. The national oil companies were increasingly relying on Schlumberger, Halliburton and other service companies and not the majors to extract their oil. But, fearful of excessive costs, he was attracted by McKinsey’s formula to replace BP’s conventional management structure. To a man interested in the dynamics of the industry but not in the minute detail of ‘what you had to do after you bought your latest toy’, the idea of establishing competing business units answerable to a chief executive was appealing. By contrast, Exxon had neutralised individual emotions and relationships to standardise the response to every problem and solution. Depersonalising employees to serve BP’s common purpose, Browne believed, would be self-destructive. BP, he knew, was too raw and too fragile to emulate Exxon’s self-confidence. The company’s staff would be encouraged to use their own initiative in the field. Taking risks was necessary for BP to survive and grow, but those risks would be subject to Exxon’s style of ruthless control of costs from headquarters.

‘We’re stamp-collecting in exploration,’ Browne told Richard Hubbard, the company’s senior geologist. ‘We either make money or walk away.’ He reduced the number of countries where BP was exploring from 30 to 10, and sacked 7,000 employees. ‘We must focus only on elephants,’ he ordered. ‘It’s the New Geography,’ acknowledged David Jenkins, the head of technology. BP was heading for unexplored areas previously barred by physical and political barriers.

The new ventures included offshore sites in the Shetlands, the Gulf of Mexico, the Philippines and Vietnam. The most important risk was a 50 per cent stake in the search for oil under 200 metres of water at the Dostlug field in Azerbaijan, and a $200 million search at Cusiana, 16,000 feet up in the Colombian jungle. Colombia, Browne told analysts in New York during a slick presentation in 1993, was to be the hub of BP’s growth: ‘We estimate that the field contains up to five billion barrels of oil.’ His optimism was conditioned by self-interest, but would yield an unexpected benefit. Oil prices, David Simon predicted in 1992, would remain at $14 a barrel until 2000, half the 1983 price accounting for inflation. The Arab countries, Simon was convinced, would welcome BP back, ‘and we’ll get our hands on cheap oil’. While OPEC complained to the British government about North Sea production undercutting the Gulf’s prices, some OPEC countries, suffering reduced income, were reversing their hostility towards foreign investment. Production in Venezuela had fallen since the nationalisation of its oilfields in 1976. BP was invited to bid to return to over 10 fields, including the Pedernales field, abandoned in 1985. Browne’s excitement, compared to Shell’s cagey hesitation, gave BP the image of a well-oiled machine. Other decisions by Browne suggested the contrary. During his ‘good news’ speech in New York he declared that the tar sands had no future, investing in Russia was too risky, and BP would not invest in natural gas in Qatar because ‘the project will not provide a good return’.

Browne’s self-confidence was fed by the inexorable monthly rise of BP’s share price. Helped by cuts in the cost of refining and marketing, and in exploration from $4 billion in 1990 to $2.7 billion in 1994, and by the sale of $4.3 billion-worth of assets including 158 service stations in California, profits were rising – in one quarter by 92 per cent. The transformation of BP’s operation in Aberdeen from loss into profit sealed Browne’s reputation. Oil production had expanded in the North Sea, especially at the Leven field, and the company was certain to extract more oil from Alaskan fields newly acquired from Conoco and Chevron. Since the US preferred Alaska’s light sweet oil to Saudi Arabia’s sour oil, OPEC would suffer. ‘One swallow doesn’t make a summer,’ David Simon cautioned, conscious that oil prices were low and that BP still relied for its entire reserves on Alaska and the North Sea, both of which were nearing the peak of production. Nevertheless, it seemed that the struggle to recover was succeeding. Browne’s admirers spoke of his magic restoring a dog to its place as one of the world’s oil majors. In 1995 BP became the industry’s darling, overtaking Chevron, Mobil and Texaco with profits of $3 billion. Debt had been halved from $15.2 billion to $8.4 billion. ‘We’ve clawed our way back,’ cheered Simon, who in July 1995 became chairman, with Browne as chief executive. ‘We’ve put them through painful changes.’ Browne’s ambition to promote himself as a different kind of oil executive and BP as a changed company had triumphed beyond expectations.

Browne’s skill was to highlight his achievements and bury his failures. Several of his ambitious hunts for elephant oil reserves had produced ‘orphans’. In Colombia, the earlier focus of euphoria, the company had become embroiled in a public relations battle with a left-wing pressure group over BP’s involvement in a civil war, the narcotics business and a regime of terror waged by paramilitaries employed to protect BP’s 450-mile oil pipeline. The alleged victims were native farmers whose land had been portrayed in an orchestrated campaign as confiscated, their water reserves depleted and their livestock slaughtered. Worst of all, the oil wells were producing less than half what Browne had anticipated. After substantial criticism, BP would eventually compensate the farmers. BP’s rivals were suffering similar disappointments. On the basis of promising geology, Mobil had invested heavily in Peru. ‘I mean, this was classic,’ said Lou Noto, the company’s president. ‘This is the classic way of how to do it. Yet we came up with a dry well – $35 million later.’ Exxon had similar failures in Somalia, Mali, Tanzania, Mozambique, Nigeria, Chad and Morocco. Shell wasted money in Madagascar and Guatemala. Arco had wasted $163 million drilling 13 orphans in Alaska. Over the previous decade, about $14 billion had been dissipated in unsuccessful attempts to repeat the last big finds in the North Sea and Alaska. Those discoveries had cut OPEC’s share of the world’s oil production from 50 per cent in the 1970s to 30 per cent in 1985. In 1994, OPEC’s share rebounded to 43 per cent, while it retained 77 per cent of the world’s reserves. Shell fired 11,000 of its 106,000 worldwide workforce. In the same year, American production fell to 6.9 million barrels a day, the lowest since 1958, and the country became a permanent net importer of oil. With demand for oil rising, OPEC’s influence appeared certain to increase. Those statistics encouraged Browne in 1995, despite his earlier reservations, to seek opportunities in Russia.

Russia’s oil could replenish the oil majors’ reserves and counter OPEC’s influence. Despite the bribes and the gangsters, none of the oil chiefs jetting into Russia on their private jets from Texas and California hesitated to assert their indispensability in saving Russia from destitution, and US vice president Al Gore did not pause to consider the consequences of flying to Kazakhstan in December 1993 to encourage the country’s split from Russia, spiting the nationalists in Moscow and St Petersburg. On the contrary, causing anger among the Russians excited President Clinton and others in Washington. Russia’s debt crisis, declining oil production and political instability, they believed, presented an unmissable opportunity. With the US importing half its oil consumption, Clinton made the diversification of supplies a priority, and the Caspian could offer at least 200 billion barrels. To win the gamble, the politicians combined with BP’s John Browne, Exxon’s Lee Raymond and Ken Derr of Chevron to display utter indifference to Russia’s gradual collapse.