Big oil must adapt to new era of lower prices, says Lord Browne

Former chief executive of BP says oil companies must make long-term changes and play a bigger role in climate change debate

Lord John Browne, Chairman of BP addresses shareholders at the AGM at the headquarters in St James's Square, Central London
Lord Browne has called on oil companies to adjust to lower prices Credit: Photo: Matt Writtle

Former BP chief executive Lord Browne has said that oil companies will have to adapt their business models to a new era of lower prices and a greater emphasis on reducing carbon dioxide emissions in order to survive.

“Today, oil majors must again look at their balance sheets and decide how best to generate value,” said Lord Browne, in a speech to the City on Wednesday night.

“That is already happening by way of short-term market forces, as costs of production come down and marginal activity is stopped. But long-term structural changes will be needed,” he said.

His remarks come after Britain’s top two international oil companies, Royal Dutch Shell and BP, announced deep cuts to spending over the next three years as they adapt to oil prices that are expected to remain at levels around $60 per barrel.

Crude has fallen about 50pc since last June amid a glut of supply and weakening global demand, which Lord Browne said “feels like an enormous shock to the contemporary industry, which has become accustomed to high prices, and which was already experiencing rising costs and falling returns”.

Lord Browne – who was recently appointed to the UK board of Chinese telecommunications giant Huawei Technology – also urged oil companies to play a more proactive role in the debate over climate change.

“It really is up to businesses to take the lead, to learn from the mistakes of the past, and to work with the rest of society towards a common future,” he said at the event, hosted by law firm Pinsent Masons.

Earlier this week BP warned that carbon dioxide emission levels from burning fossil fuels are unsustainable unless the international community unilaterally introduces tougher binding regulations on atmospheric pollution.

The United Nations is seeking to limit the increase of the average global surface temperature to no more than 2C, compared with pre-industrial levels, to avoid "dangerous" climate change, and will hold a major conference in Paris in December to agree on a firm system for restricting emissions.