Exploiting digital technology - a vital element for delivering high performance growth

I hope you can all manage my slight Scottish accent. I believe that for large audiences - it can be a bit disconcerting. You hear the Scottish voice, you look around for Sean Connery, and who you see is Dr No.

On the other hand, "No" is not a bad place for me to start this morning. I was asked to answer the following question: "Has there been too little upstream investment and will there now be too much?" However, I must say no to the question in general because I believe that this is not the most important question today.

And at this point, I'm certain, that the conference organisers are wishing they had asked Sean Connery to speak

Instead, I think a more interesting question is: can we deliver high performance growth into the future? Therefore, instead, of debating "Was it too much, not enough, or somewhere in between." I believe we must focus on the quality of the investments.

Another obvious question is why am I, the CIO of BP, talking about upstream investment at all? The answer is that BP views ALL technology - including digital technology - as a vital element for the deliver of high performance growth.

Now that I've redefined the question a little, how am I going to answer it? I think it's useful, first to recap , briefly, the global industry picture. I will then outline BPs investment programme and what we've learned so far….And finally I will explain why I believe the answer lies in our ability - as energy companies - to exploit the opportunities offered to us by the progress in, and the application of digital technology.

Context
SO, first up, the GLOBAL picture. Inside and outside OPEC, The industry believes oil supplies will increase significantly over the next five years. Market reports are quoting capital spending increases in 1999 and 2000.

Which is why: it is NO LONGER a matter of the ABSOLUTE LEVEL of the investment we make. It's a matter of QUALITY of these investments.

BPs Experiences
Turning to BP, this is an interesting week. Our results are being published and discussed with the analysts and in addition, I have this opportunity to discuss high performance growth.

So, what has BP done to get the most from our investments in the Upstream? Historically, BP (as an aggregate of our former parts) has spent about two thirds of our total investment spend on our upstream business.

Here's where it really gets interesting. We have shown, and will continue to show going forward, marked improvements in our fundamental efficiency. Specifically, over the past five years our finding-and-developing costs have improved from over $4.00 to under $3.50/BoE and our production costs from over $3.20/BoE to under $2.80. Nor does it stop there. We must continue to generate sustainable performance improvements.

Why is this a big deal? Other companies are showing similar levels of improvement. We think this is a big deal, because while BP will follow the general trend line, we expect to be on the higher side of the trendline.

It's a really big deal for us because it means, in effect, that our newly integrated company is working a lot better and a lot smarter.

Across the globe, we now have a rich and diverse range of knowledge and experiences. Our digital capability is enabling us to learn from each other -- more effectively, more profitably, and now also practically instantly.

This digital technology will not only change the way we work but will transform the way we run our fundamental business. This, ladies and gentlemen, is the future. Digital technology is not merely redefining the rules of the energy game -- it is redrawing the entire playing-field.

At BP, we saw this coming about two years ago. We set out to make it a reality in our company. We also decided to seek a central position in shaping the new digital world in our industry. Having personally played a particular role in driving the company towards this goal, I am convinced that many of the answers we are looking for at this session, lie in our ability -- as energy companies - to exploit the new opportunities offered to us by the application of and exploitation of digital technology.

For BP, it means "living on the Web" and we express our intentions here in three ways:

• Firstly, directly through the Technology. Which, I am sure for this particular audience speaks for itself
• Secondly, through our Relationships.This digital technology is completely changing the way we relate to employees, suppliers, customers and, most importantly our partners
• And thirdly, through our digital philosophy. Which boils down to: Making digital business fully integral with the daily life of the businesses of our company all around the globe, not a parallel corporate universe. Experimenting purposefully and exploiting very early. Re-inventing our business models and processes. And finally starting small, thinking big, and scaling up fast not only within a single business unit - but also across the world of our global operations

Looking again at BP's experience with digital investments, our approach has not been simply to plough money in. We wanted more bang for our buck. In fact we insisted on it because change - especially radical change like this - is of no real value unless the benefits can be demonstrated on the bottom line.

And that means bottom line benefits:

• for our employees - in making them more productive - as individuals and as teams
• for our partners in our joint ventures
• for our suppliers across the globe
• for customers at the point of service and delivery
• and ultimately for shareholders in the value we add to their investment

As this is an Upstream discussion, I will touch on those aspects of BP's transformation into a digital business that are more obviously Upstream:

• In the North Sea, for example, we have posted on the web all of our infrastructure capabilities and specifications -- platforms, pipelines, terminals and so on
  
  
• For the 40s pipeline, we now offer - for the first time - a completely transparent online offering of commercial terms and tariffs for pools less than 20 million BoE which wish to enter the pipeline
  
  
• We've got helicopters in the North Sea currently operating at a capacity of 60%. By bringing traffic patterns and passenger loads online, we can achieve 80% - and save the industry $20 million a year. And, we can apply the same technology and principles to our supply chain in West Africa and in the Gulf of Mexico

• We're also laying fibre-optic cable to our central North Sea platforms. Not only will this allow media-rich, data-intensive interaction between platform and field operations, pipeline operations and on-shore support. We will also be able to offer spare bandwidth to other operators in the area - including commercial telecoms companies operating between the UK and Norway. And why stop over the water? We can apply it just as well to our snowbound operations in Alaska, or our sand-bound operations in the Middle East….and release even more value
  
  
• Sub surface, as you know, it gets even better - with the new 4D seismic technology
  
  
• In Houston, our new drilling operations visualization centre - the HIVE, which cost us a million dollars to build - saved us five million dollars in its first week of operations. This visualization technology will dramatically shorten the cycle times of our developments. Stakeholders will share private networks for project-specific information, including real-time data from the field. This collaboration will cut out duplication, will improve information sharing and will speed up decision making. It will provide real time data and information to engineers and financial backers - information they could not have dreamt of even three years ago
  
  

Ladies and gentlemen, the benefits we can list are only the ones we can currently think about. By which I mean that the future opportunities of this digital era are probably channelling incalculable.

Conclusion
So let me feed all this into the question I've posed: "Is our industry getting all that we truly can from our investments?"

So in this context, let me pose another question to you: "To achieve the productivity gains necessary to compete in the next decade… are you investing in the digital future of your company?"

Inside the answer to this important question lies the early indications of your company's future success… or failure.

I thank you.