A Citizen’s Guide

BP chief Lord John Browne said the opportunity to develop North Slope natural gas represents “the next great phase in the history of the industry in Alaska.”

Browne spoke in Fairbanks on Friday to an invited crowd of 200 at the Westmark Fairbanks Hotel and Convention Center’s Gold Room. It was one stop on a swing that has taken the oil giant’s group chief executive from California to Alaska’s North Slope in a matter of days, including a stop Thursday in Anchorage.

Browne promised that BP fully intends to help build a natural gas pipeline from Alaska through Canada.

His visit comes as the state’s policy makers continue to disagree over whether to approve a new tax regime, one that would be included in a pipeline-related contract reached early this year between Gov. Frank Murkowski and BP, ConocoPhillips and Exxon Mobil.

Browne did not focus on the proposal directly, sprinkling his speech instead with a view of the international energy market–and the company’s and state’s places in it–and the history of oil production in Alaska.

He did say he hopes, however, a mutually beneficial agreement between parties in Alaska can be reached–an agreement that would kick off engineering and construction of a pipeline.

“We are ready to proceed,” Browne said. “It will be an unprecedented project and we are excited and pleased to be moving ahead, with the state as a full partner.”

Friday’s breakfast was co-hosted by Mark Hamilton, president of the University of Alaska, but maintained an industry home-court feel. Browne spoke before a backdrop of the company’s logo. Before the speech, video screens played interviews of Fairbanks-area residents touting the benefits a gas pipeline would bring, including jobs and a boost to the economy.

In an interview following the event, Browne said that in an energy market that experiences changes in prices and supply, companies cannot predict revenues and need to know what variables exist before investing in major projects.

“It’s a matter of getting the balance of risks right,” he said.

The demand for oil and gas has steadily risen worldwide, particularly from emerging Asian markets, he said. Meanwhile, conflict and political uncertainty in other parts of the world “clouds” the world energy scene.

“All that,” Browne said, “means that the ability to develop supplies from within the United States is now of enormous strategic value.”

BP recently completed another large project, an oil pipeline running from the Caspian Sea across three Middle Eastern nations to the Mediterranean Sea. The pipeline also bypasses Russia, a regional energy giant.

When referring to that project, Browne sounded a note that paralleled comments made by some during the Legislature’s discussions: The Caspian project’s success was due in large part to the establishment of a regulated and stable fiscal environment. That environment, he said, created a “mutual advantage” where all parties were considered and respected.

That idea sat well with Jerry Walker, who attended the breakfast. Walker, vice-president at a Fairbanks bank, said he takes a wide view of resource development rather than just looking at the residents of Fairbanks and Alaska. The state, he said, has an obligation to work with companies to work in a reliable and environmentally-sensitive fashion.

“I think as a state, we have an obligation to be responsible in the exchange of our resources for the people of the state and for the energy stability of North America,” Walker said.

Browne also reviewed the history of oil production on the North Slope. While past its peak years, he said, production is still robust–the industry directly and indirectly supports jobs that provide a $1 billion annual payroll statewide.

The coming years could be even better, said Browne, who spent his early years at the London-based company as an apprentice, then later as a field engineer and staff engineer in Alaska. He remembered sensing a persistent public concern that the state’s resource boom would be short lived.

“Those predictions have always proved to be false,” he said, noting five of the country’s 10 largest fields are in Alaska.

BP, he added, is also working with the federal Department of Energy on projects involving gas hydrates, ice-like solids that form in polar regions from a mixture of natural gas and water. Natural gas hydrates contain significant amounts of methane, according to the U.S. Geological Survey. The company’s work, if successful, would increase the chances of long-term investment here, he said.

Answering a question about the company’s role in world community’s effort to confront climate change, Browne mentioned BP’s 10-year effort to change its products and operations in order to reduce the levels of emitted carbon-dioxide. The company also launched BP Alternative Energy, a business aimed at investing billions of dollars over the next decade into sources of alternative energy in order to reduce greenhouse gases, last year.

Browne described recent months as being “uncomfortable” for the company. BP recently dealt with a March oil spill on Prudhoe Bay, a fatal explosion this spring at a Texas oil refinery, and a price-fixing scandal involving propane traders with the company.

The incidents, he said, “raised questions about the integrity of our infrastructure.”

Browne said he welcomed the scrutiny that follows such events, saying the company has to restore trust with the public. BP, he said, has responded with steps including new corrosion-monitoring systems and by removing the line responsible for the leaks. In all, the company’s response to the spill will total over $50 million, he said.

Browne was knighted in Britain in 1998, and was voted Most Admired CEO by Management Today in 2000, 2001 and 2002. He recently announced plans to step down as CEO at the end of 2008, conforming to a company policy where employees retire at age 60.

After the event, Hamilton, the event’s community host, said he appreciated Browne’s ability to focus on the big picture when addressing a group with diverse interests. When asked why he had co-hosted the event, Hamilton said he, like everyone, just wanted to know more about BP’s plans in Alaska.

“I wanted to hear it from them,” he said.

Chris Eshleman can be reached at 459-7582 or ceshleman@newsminer.com.