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Oil, money and greed
A new book tells the story of the oil industry's boom-bust cycle through the personalities of its main protagonists. It isn't always a flattering portrait, writes Derek Brower
OIL AND geopolitics is a sexy subject, prime material for writers and historians with an eye on the underlying themes of the recent past. Daniel Yergin's The Prize set the standard almost 20 years ago and the author has updated his seminal story to account for the boom (and semi-bust) of the last decade. Otherwise, books for the general reader have appeared only sporadically. This has changed. The obsession with energy supply, the apparent dwindling of resources, the worries about impending environmental catastrophe and the conflicts across the globe since 2001 are behind a surge in literature trying to make sense of it all. Biographer Tom Bower's new book The Squeeze: Oil, Money and Greed in the 21st Century is the pick of the bunch. It tells its story through a shifting lens that takes in the industry's most compelling personalities. That approach suits the author's gifts as a biographer of the great and occasionally good: Bower has also written controversial accounts of disgraced media mogul Conrad Black, UK prime minister Gordon Brown, and other luminaries with quirky pasts, such as Mohammed Al-Fayed and the entrepreneur Richard Branson.  If there is a hero of his narrative it is BP's former chief executive, John Browne. Yet he's also the book's antihero and it isn't an entirely flattering portrait of the man once dubbed the greatest businessman of his generation. Suggesting hubris, the account of Browne's pursuit of first Amoco and then Arco relies on bested opponents who still seem happy to stick the knife in. ExxonMobil's executives seemed particularly keen to snipe at BP and its "Sun King". But Browne's drive to launch BP into the stratosphere of global energy firms was, Bower shows, the impetus for many of the structural changes in the corporate sector that defined the era of big oil as it entered the boom years of the last decade.
Prickly characters There are also portraits of prickly characters such as ExxonMobil's former chief, Lee Raymond. Some of the details Bower repeats are delicious: while negotiating for control of Yukos in Russia, for example, Raymond and his wife commanded an entire floor of Moscow's most expensive hotel. Because Raymond and his wife were travelling home on a Sunday, the city's Baptist church was made available to them for prayer on the Saturday. Later, on the night of George W Bush's inauguration in 2005, vice-president Dick Cheney skipped the parties in Washington and celebrated instead with Raymond at a private dinner. The "emperor", as Bower refers to ExxonMobil's former boss, was oil, power, and US capitalism personified. The book is especially strong on such juicy details, not least when it describes the machinations – rivalries, personality clashes and egos at work – during the mega-merger period of the late 1990s. Browne's successor, Tony Hayward, is seen entertaining Gazprom boss Alexei Miller at a Chelsea football match in London. Shell's former chief, Jeroen van der Veer, argues in German, without interpreters, with Russia's then president Vladimir Putin about the Sakhalin Energy project at a private function in Holland. And so on. The majors also have personalities. Exxon, a participant in the mega-mergers when it bought Mobil, is the brooding presence throughout. Shell was repeatedly bruised by run-ins with environmentalists and activists, and its bi-national schizophrenia left it flatfooted as Browne and BP seized the agenda. And Bower shows how the fallout from Browne's take-overs of Amoco and Arco and merger with Russia's TNK, as well as the strategy to slash costs and boost its rate of return on capital, had consequences far beyond boardrooms. ExxonMobil's pursuit of a stake in Mikhail Khodorkovsky's Yukos, Bower suggests, was a response to BP's merger with TNK and its successful template of building reserves through transactions and not the drill bit. This had consequences for Khodorkovsky, of course, who within weeks of negotiating with Raymond was in prison. Russia's reputation under Putin, another surly character in Bower's book, never truly recovered from those events. Nor did Browne's cost-cutting strategy bring the success he hoped for. Bower shows how the Texas City fire in 2005 and, a year later, the Alaskan pipeline leak were "inevitable" consequences of Browne's and BP's stinginess. As Bower points out, Browne's successor, Tony Hayward, would later recognise the failures of a strategy that sought to do "more for less". But another consequence of the mega-merger period spearheaded by Browne was underinvestment in reserves. This was a big factor in the great bull run of the past decade, Bower argues. And although the book offers a good description of the rise of the speculators, the perceptions of peak oil and a coming supply crunch that hung over the market in recent years represented a collective failure that Bower lands squarely on the doormat of the big western oil firms and their "cowardice". Indeed, the majors emerge from his book as the gang who couldn't shoot straight. BP ran into trouble with TNK because the company never fully unravelled the Russian enigma. Robert Dudley, the BP-appointed boss of the merged firm, only spoke pidgin Russian; and BP's executives never seemed to grasp the intrigues of the country's politics and the relations between its oligarchs and the Kremlin. Shell also handled its Russian investments badly, unintentionally antagonising the authorities, with humiliation on Sakhalin island the result. The Anglo-Dutch firm emerges from the narrative as a sluggish behemoth, crippled by internal rivalries between the Hague and London, undermined by its own constitution and eventually brought low by the reserves scandal. Phil Watts, the chairman at the time, who was eventually exonerated from wrong-doing in the affair, receives relatively sympathetic treatment in the book. Shell did wrong, acknowledges Bower, but other majors were booking reserves in a similar way and escaped censure or lobbied their way out of it. Other portraits, such as that of the master trader Andy Hall of Phibro, help explain the rise of the trading class from the shadows of the oil industry to its electronic apex, exerting the kind of power over oil prices that once belonged to Opec. Yet the account of the cartel and some of its nationalist members is shallow by comparison with the depiction of the majors. And there are some mistakes in the book. Russia's production-sharing agreements – the dismantling of which was a theme of that country's strategy under Putin – are called "private sharing agreements". The merged ExxonMobil is described, bizarrely, as a "minnow" in the industry. And there are confusing accounts of how the oil market works. Bower is stronger when he gets inside the personalities operating in the upstream. But it's not a book that leaves the reader feeling positive about the characters who dominate the world's most important industry. "Oil men can play to any rules they are asked to play," Bower quotes former Shell chairman John Jennings. "Oil breeds arrogance because it's so powerful."
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