British Petroleum British Petroleum ColombiaColombiaGroup 4Group 4

BPBP

One of the world largest petroleum One of the world largest petroleum companiescompanies

Three activities:Three activities: Exploration and ProductionExploration and Production Refining and MarketingRefining and Marketing ChemicalsChemicals

56000 employees worldwide56000 employees worldwide High profitability: 17% ROCHigh profitability: 17% ROC Turnover $71.3bn.Turnover $71.3bn.

Business ModelBusiness Model

ColombiaColombia Population of 37 millionPopulation of 37 million GDP: $80bnGDP: $80bn Main activities:Main activities:

AgricultureAgriculture CoffeeCoffee Mineral resourcesMineral resources Narcotics (cocaine)Narcotics (cocaine)

Civil war with three guerillasCivil war with three guerillas Political instabilityPolitical instability Attacks against government Attacks against government

installationsinstallations Democracy issuesDemocracy issues

BP’s operations in BP’s operations in CasanareCasanare

Exploration since 1986Exploration since 1986 Production license from 1994Production license from 1994 Main operator of the Casanare oil fieldMain operator of the Casanare oil field Operating inside a joint venture:Operating inside a joint venture:

Ecopetrol: 50%Ecopetrol: 50% BP: 19%BP: 19% Total and Triton: 31%Total and Triton: 31%

Casanare is an agricultural area on Casanare is an agricultural area on the foothills of the Andesthe foothills of the Andes

Casanare was cut off from Casanare was cut off from government interestgovernment interest

What BP didWhat BP did

$10 million p.a. on social $10 million p.a. on social programmes: small business programmes: small business development, health education and development, health education and local infrastructure …local infrastructure …

$30 million on environmental $30 million on environmental protectionprotection

BP environmental standards are BP environmental standards are higher than the government higher than the government standardsstandards

IssuesIssues

Unfulfilled commitment to the Unfulfilled commitment to the community groupcommunity group

Damage to a forestry reserveDamage to a forestry reserve Human rights issuesHuman rights issues Environmental problemsEnvironmental problems

Stakeholder Dynamics in Stakeholder Dynamics in CasanareCasanare

Risks of Business ModelRisks of Business Model Safety issues:Safety issues:

StaffStaff InvestmentsInvestments

Exploration and Production in other Exploration and Production in other countries involve a big exposure to countries involve a big exposure to political and social stability issuespolitical and social stability issues

Capital intensive BM → long return Capital intensive BM → long return path: once they invest in a country they path: once they invest in a country they must cope with all problems they’re must cope with all problems they’re exposed toexposed to

Environmental risksEnvironmental risks Local communities oppositions and Local communities oppositions and

claimsclaims

Accountability issuesAccountability issues Internal:Internal:

First level: The problems had to be tackled First level: The problems had to be tackled by BP Colombia in the basis of first report, by BP Colombia in the basis of first report, because BP Colombia is the operator of the because BP Colombia is the operator of the oil fieldoil field

Second level: The Colombian problem Second level: The Colombian problem reached a worldwide level (BP Worldwide)reached a worldwide level (BP Worldwide)

External:External: Human rights problemHuman rights problem Brutalizing populationBrutalizing population Not fulfilling commitment towards the local Not fulfilling commitment towards the local

populationpopulation

Key learningsKey learnings Reactivity is important. Problems tend to Reactivity is important. Problems tend to

grow when they are not tackled in time.grow when they are not tackled in time. The corporation should integrate social and The corporation should integrate social and

environmental risks in implementing its environmental risks in implementing its Business Model, particularly in this sector.Business Model, particularly in this sector.

The defensive behavior of BP Colombia didn’t The defensive behavior of BP Colombia didn’t solve the problem!; it is a short term solution solve the problem!; it is a short term solution and cannot be sustainable in the long term.and cannot be sustainable in the long term.

BP Colombia hasn’t succeed in acquiring the BP Colombia hasn’t succeed in acquiring the legitimacy a business like this needs.legitimacy a business like this needs.

BP didn’t develop partnership with local BP didn’t develop partnership with local organizationsorganizations

The basic needs of the community had to be The basic needs of the community had to be the basis of the investment.the basis of the investment.