Founded in 1908 as the Anglo-Persian Oil Company, BP has transformed itself from the humble beginning of a local oil company into a global energy group. Its operations are well established in six continents, with the sale of its products in over 100 countries (Christiansen). Upstream, BP is active in 26 countries with production activities in 22 countries, while downstream, its assets include 19 refineries and 28, 500 service stations worldwide. Due to these reasons, BP is one of the four "vertically integrated private sector oil, natural gas, and petrol super majors in the world" (Wikipedia).
The following figures from the 2005 annual report are a general indication of the size and scope of BP's operations:
-2.6 million barrels of oil produced daily
-5.8 million barrels of oil refined daily
-Profit of $19.3 Billion
-Total assets of 207 Billion
Its origins date back to the early 20th century with the discovery of oil deposits in Persia (now Iran), which led to the formation of the Anglo-Persia Oil Company. Following Iranian nationalization, BP was forced to look beyond the Middle East to the USA, and the North Sea, and it is largely this strategic move which helped it survive the oil shock of the 1970s. In 1954 the Anglo-Persia Oil Company was renamed British Petroleum, and then from the mid-1970s, BP pursed a diversification strategy which led to the inclusion of new business areas, such as minerals, coal and chemicals. Towards the late 1980s, BP decided to change its strategy, concentrating efforts on its core activities in petroleum and chemicals.
[...] CEO Bourne believed that “employees living out these values in their day to day personal and work lives would institute real change in attitudes and behavior becoming a point of differentiation” The Helios The Rebranding of BP was designed to shift the traditional autocratic image of the past to reflect the company's desire to produce cleaner energy in the future. The Helios logo was chosen to represent the change in BP's culture and values. Shaped like a sunflower and named after the Greek God of the sun, the Helios not only represents BP commitment to the environment, but also represents cultural change within the company, which, like a sunflower, is made up of many interlocking parts reflections of the many business units working as one towards a common goal. [...]
[...] An independent assessment by Coffman Engineers in November 2001 concluded that the reporting style and corrosion control systems in place at the time ‘made it difficult to develop a qualitative understanding of the basis and underlying strategies employed by BP Alaska” Further, the inadequacy of BP's control systems has been highlighted following the Texas refinery explosion, which killed 15 employees and injured 500. Again, BP had reported to regulators that updated equipment had been installed in 2003; equipment that those investigating the Texas refinery explosion claim would have prevented the disaster. [...]
[...] BP has learned through their mistakes, such as the losses suffered due to the poor maintenance of their pipelines. As a result controls systems have now been revised to make sure BP doesn't suffer any more losses or incur anymore tarnishing to its reputation. BP has also learned through its successes. Many of BP's projects which have been undertaken in pursuit of vertical integration, have been successful. BP now has several more projects which are currently in formulation or in development, and are designed to promote overall growth and add to shareholder value. [...]
[...] Thirdly, NGLs (Natural Gas Liquids) are growing at reflecting the growing worldwide gas production, as we can see on the graph: (Vivienne Cox, webcast BP strategy and fourth quarter results 2005, slide 53) Fourthly, BP also markets its own, as well as supplies third party gas directly to businesses in North America and Europe, with total gas sales volumes in 2002 of 21.6 billion cubic feet of gas a day, which emphasized an increase of 15% over 2001. In addition to building new profit centers, BP also strives to maximize productivity in its existing upstream profit centers, the most notable of which are the North Sea, Alaska and North American gas. [...]
[...] Through integration, BP can internally: Lower transaction costs Synchronize supply and demand along the chain of products Lower uncertainty increase investment Overall this integration enables them to reach their objectives of leading the energy market, optimizing their pipeline systems, and becoming more flexible with supply in a bid to create value across their supply chain. (Reference?) An example of BP's success through vertical integration is the working partnership between BP and its partners Kinder Morgan Energy and its subsidiaries. The agreement comprises an important step in BP's growth strategy as one of North America's leading energy marketing companies. [...]
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