Normal Capitalism or Obscene Profits?
By Nelson Schwartz

(FORTUNE Magazine) - Last month BP (Research) reported record profits of more than $22 billion for 2005. Although that's less than industry leader Exxon Mobil's (Research) $36 billion haul, BP is Europe's largest energy company, with oil and gas production totaling more than four million barrels a day, not far behind Exxon's 4.3 million barrels a day. FORTUNE Europe editor Nelson Schwartz sat down with CEO John Browne at BP's London headquarters to talk about profits, production, and whether we could soon see $100-a-barrel oil.

Your company had a record year in 2005. Is that right when drivers are paying record prices at the pump?

The profits are the result of some significant risk taking at a time when prices were very low, less than a third of what they are today. There must be a reward for risk taking. That's normal capitalism.

So the profits aren't obscene?

You have to ask what happens to the money. The money isn't stuffed back into the company. It's invested in the future, so we can sustain free cash flow, and secondly, it's distributed to pension funds, which means people, real people. And 40% of our stock is held in the U.S., most of that in 401(k)s. It's about getting money back to people to provide for their future.

Did you see Syriana, which portrays a powerful multinational oil company in the worst possible light?

I would call this film entertaining nonsense, but it does speak to people's views and prejudice toward the oil industry. It doesn't work like that. We are a business in common with all businesses: We only exist to serve human needs. We have to do it responsibly, we have to do it rigorously, and we have to do it in a way we shouldn't be ashamed of.

Doesn't the industry have a PR problem, at the least?

In many parts of the world, people don't understand how big business works. It's all a mystery. The energy industry is vital; we need to attract the best brains to this industry. They haven't come in lately. We need to make the industry fashionable to get those brains back.

President Bush mentioned ethanol in the State of the Union address. As the CEO of a fossil-fuel-based company, how seriously do you take this?

I take it very seriously. People really do want greener energy, and they want energy that is local. Ethanol is a local part of it. This is just the beginning. With higher prices, the economics of bioenergy and alternative energy become more attractive.

Why is BP's production growth ahead of Shell's (Research) and that of other rivals?

We have some great projects coming on. BP is involved with 50% of the non-OPEC production growth that's going to occur in the next three years. After that we've got a cupboard full of stuff that will keep us growing for a long time.

Are you concerned about a superspike that could lift oil to $100 a barrel?

I rule nothing in, and I rule nothing out. It's a sensitive balance at the moment. If something were to go out of the supply chain--Venezuela, Nigeria, Iraq, Iran, or Saudi Arabia--obviously it would tighten up supplies, and there would be a reaction. Let's hope that doesn't happen. We have a bit of spare capacity, not a lot, but not enough to cover the outage of a whole country. Top of page