8 ★ FINANCIAL TIMES Monday7 October 2019
C O M PA N I E S & M A R K E T S
G E O R G E H A M M O N D— HONG KONG
Hong Kong’s commercial property sec-
tor suffered its worst month since
before the handover of the city from
British to Chinese rule in 1997, as
monthsofprotestsintheterritoryhave
pushed investors away from the Asian
financialhub.
In September, just 27 transactions
were made across Hong Kong’s office
market, the lowest level of monthly
activity since 1996, according to Mid-
land IC&I, a Hong Kong-based property
brokerage.
Activity failed to reach such lows
through the Asian financial crisis in
1997, the Sars outbreak in 2003 or the
globalfinancialcrisisin2008.
The city’s economy has been badly
affected by the US-China trade war and
the increasingly violent protests that
have thrown it into its deepest political
crisisindecades.
Business confidencesank to a seven-
year low n September, according to thei
IHS Markit Hong Kong purchasing
manager’sindexpublishedlastweek.
Hong Kong’s major property develop-
ers have seenshares plunge ince thes
startoftheprotests.SunHungKaiProp-
erties is down 14 per cent, Henderson
Land 12.4 per cent and Li Ka-shing’s CK
Hutchison Holdings is down 11.4 per
centsinceJune10.
Daniel Wong, chief executive of Mid-
land IC&I, said investors are “pessimis-
tic about the future status” of HongKong, adding that many are choosing to
spend money across the border inShen-
zhen.
Between April and the end of June,
there were 346 transactions, ut in theb
following three months sales have fallen
bytwo-thirds.
Across the 50 “grade A”, or highest
quality office buildingsin Hong Kong,
there was just one transaction last
month: a deal for 1,279-square feet of
space.
Cushman & Wakefield, the commer-
cial real estate company, says office
landlords are grappling with slumping
demand as “tenants [hold] off commit-
ting to relocations or expansion in the
face of growing economic and social
instability”.Property
Protests weigh on Hong Kong’s office market
A N J L I R AVA L— LONDON
When Bob Dudley became BP’s chief
executive in 2010, he faced a political
and public backlash in the US after the
deadlyGulfofMexicoblowout.
Hehadtobringtheenergymajorback
from the brink of collapse and secure its
societallicencetooperate.
Nearlyadecadeon,ashehandsovera
revived company to Bernard Looney,
BP’s long-term survival is again under
scrutinyamidpressuretoactonclimate
change — a challenge that the entire oil
andgasindustryisgrapplingwith.
“Bob steered BP through a difficult
timethatisunprecedentedinthelast
years,” said Jason Gammel, energy
analyst at Jefferies. “The situation BP
faced was unique to the company. Now
Bernard faces a set of choices that all of
itspeersalsohave.”
After managing the Deepwater Hori-
zon disaster, the fractious break-up of
the TNK-BP joint venture in Russia and
the oil price crash of 2014, Mr Dudley
focused on the “dual challenge” of pro-
vidingtheworldwithmoreenergywhile
dramaticallyreducingemissions.
However, it is his successor who must
spell out what this means for BP’s
corporatestrategy.
The pressure is mounting. Sharehold-
ers are demanding BP take greater
action on climate change, Greenpeace
activists this year scaled one of its North
Sea oil rigs and shut down its London
headquarters. BP’sfunding of the arts si
also under scrutiny. Yet most investors
are still enticed by the dividends that it
generates.
Mr Looney, a 49-year-old Irishman
with a reputation as a strategic thinker,
will need to decide which direction to
take the energy major as it prepares its
next five-year strategy beginning in
2021.
Since claims from the Gulf of Mexico
disaster have fallen, BP has a more
robust balance sheet and has weighed
cash generated from its businesses and
divestment proceeds with capital
spending,dividendsandbuybacks.
Mr Looney has helped deliver higher
production and running projects more
efficiently. BP reported earnings of
$12.7bn in 2018 — as high as when oil
was trading closer to $100 a barrel —
comparedwith$6.2bnin2017.
It has invested in wind farms, solar
power, biofuels and low-carbon start-
ups, but returns from these businesses
do not match its core oil drilling
division.
“Does BP stay as Big Oil or does it
become Big Energy — diversifying into
power and renewables in a meaningful
way,” said Ed Crooks at consultancy
Wood Mackenzie. “It feels like BP right
nowisonthefence.”
Mr Looney, a BP lifer, was formally
selected at a board meeting on Thurs-
day, triumphing over chief financial
officer Brian Gilvary. External candi-
dates were considered but Mr Looney
hadlongbeentippedforthepost.
Since 2016, he has headed BP’s explo-
ration and production business after
operationalrolesaroundtheworld.
Identified early on as a rising star, he
was made an executive assistant, or
“turtle”, to Lord Browne when he was
chiefexecutive,namedaftertheTeenage
Mutant Ninja Turtleswho were on hand
wheneverhelpwasneeded.
When oil gushed into the Gulf of Mex-
ico from the Deepwater Horizon rig, Mr
LooneywasflowntoHoustontohelp.
“It was, without doubt, the most chal-
lenging time of my career,” he told the
Irish Independent newspaper last year.
“He never talked about it a lot but it
was very clear that his ambition was to
run BP,” said a person who has known
Mr Looney for decades. “The issue on
his watch will be how BP engages with
the energy transition in a substantive
way,whichmostpeoplewouldsaysofar
theyhavebeenpayinglipserviceto.”
Unlike peers Royal Dutch Shell and
Total, which are banking on low-carbon
electricity, BP has been more cautious
given the failure of its “Beyond Petro-
leum”renewablesdriveinthe2000s.
Paying out tens of billions of dollars in
clean-up fines for the Gulf of Mexico
spill also engendered a sense of caution
in the group, making it reluctant to take
anyparticularpathway.
But BP knows it needs to go further.
“We are in a fundamentally new era,”
said a BP insider familiar with the suc-
cessionprocess.
MrLooneygrewuponafarminKerry
and was the first in his family to go to
university. Widely liked and respected,BP sought a “modern” leadership style,
far removed from the autocratic tough
guy approach that dominates the oil
industry, said a person familiar with the
thinkingofBP’sboard.
He demands the best of people but is
aware of his own shortcomings. Tall and
statesmanlike, yet personable, he is also
likedbyinvestorsandrivals.
“Bernard has remained humble even
as he has risen up the ladder,” said a
colleaguewhoknowshimwell.“He’sthe
samepersonhewas25yearsago.”
ForMrLooney,aslongasBPproduces
the hydrocarbons the world requires, it
needs to improve the efficiency of these
operations by reducing costs, project
timelinesandembracingtechnology.
Helge Lund, BP’s new chairman, will
be a key partner for Mr Looney. MrLund, while seeing himself as a light-
touch coach and strategist, has already
made his intentions for the company’s
futureapparent.
“Our evolution into broader energy
companies would require us to create
new carbon-neutral businesses at an
unprecedented rate and to transform
existing businesses,” he wrote in an
opinionpiecefortheFT.
But what this transformation at BP
looks like remains unclear. Sharehold-
ers are demanding greater disclosures
about how its existing business and
future investment plans align with the
Parisclimategoals.
BP has come under fire for its mem-
bership of industry groups that have
lobbied to weaken environmental regu-
lations and or not taking responsibilityf
fortheemissionsreleasedfromthefuels
itscustomersburn,suchasincars.
“We hope a new CEO will create room
for BP to commit to the Paris Climate
Agreement by assuming responsibility
for product emissions, something Bob
Dudley was firmly against,” said Mark
van Baal, founder of activist investor
groupFollowThis.
AfterMrDudley’sappointment,there
was a feeling he took too long to get
investors onside because he was cau-
tious about making promises he could
not deliver on, two company insiders
said.
Mr Looney may face the same
dilemma and, this time, the range of
stakeholders to placate is broader and
theiropinionsmoredivergent.
One confidant of Mr Looney said:
“The energy transition will play out at
varying paces in different parts of the
world, this is the challenge Bernard will
havetonavigate.”
Additional reporting by Neil HumeLooney’s BP reign hinges on energy transition
New chief ’s leadership will be defined by how he spells out the oil major’s strategy under the pressure of climate change
BP’s performance since the Gulf of Mexico oil spill
Pence per shareSources: Refinitiv; Bloomberg Deepwater Horizon disasterBob Dudley takes over as CEOReports worst-ever
annual lossAgrees to buy BHP's
US shale assets for bnHelge Lund
appointed
chairmanBernard Looney confirmed
as new CEOEarnings
Underlying replacement-cost profits (bn) Total production
Global output (mboe/d) Forecast‘Bernard has remained
humble as he has risen up
the ladder, he’s the sameas he was 25 years ago’
Bernard Looney has been vital in
leading BP’s digital drive by squeezing
costs, delivering projects on time and
enabling the major to stay competitive,
whatever the oil price.
“We want to be the leading digital
upstream business,” said Mr Looney in
an interview ahead of his new
appointment. “We need to do that for
productivity, for cost, for efficiency; we
also need to do it for our people, and
for the next generation.”
Under Mr Looney, BP has expanded
its relationship with Palantir
Technologies — the secretive Silicon
Valley data analysis company with
which it has a $1.2bn 10-year contract
for its data integration platform —
allowing it to pool information from
across its business.
One way it is using this technology
is to find the most efficient pathways
for oil through BP’s systems.
BP has thousands of operating wells
connected via pipelines to production
facilities. An oil molecule has billions of
possible routes through which it could
travel the system, so with Palantir, BP
built a “digital twin” of that
infrastructure — a simulation that it
feeds data through to find the best
route of travel.
Rather than a pipeline shutdown for
maintenance resulting in days of lost
production, the system can tell BP how
to reroute flows — and at what speed
— so no time is lost.
This adds up to more than 30,
extra barrels of oil a day.
Mr Looney likes to tell people that if
the company took all the data it held
and copied it on to DVDs, it could build
a stack taller than the Eiffel Tower.
“Anywhere in our system where
there is tonnes of data, there is value
that is being unrealised,” he said.Data drilling
Secretive Silicon Valley
group unlocks digital gainsHot seat
OCTOBER 7 2019 Section:Companies Time: 10/20196/ - 17:58 User:stephen.smith Page Name:CONEWS2, Part,Page,Edition:EUR , 8, 1