Browne. “That’s it.” He asked Fuller to let him know within the next twenty-four hours. Several hours later, Fuller called back. It was a go, he said. He was getting on his plane.
A few days later, August 11, 1998, BP convened a press conference in the largest venue it could find, on short notice, in London—the Honourable Artillery Company, in the city of London—in order to accommodate a huge press corps. It was clear that something very big was about to be announced. London was in the midst of a heat wave, and it was another hot day, blazing hot, and the circuits in the building were overloaded by the temperature and all the television cameras. As Browne stood up to announce the deal, a fuse blew. The whole room went dark. Not an auspicious start for what was, up to that point, the largest industrial merger in history. But the sensational news got out far and wide—a $48 billion merger, a potentially transformative step for the world oil industry. And, although not said publicly, it was what BP needed if it was to become a heavyweight.
The implementation proceeded quickly. The Federal Trade Commission found no major antitrust issues. The businesses of the two companies “rarely overlap,” said the chairman of the FTC, and consumers will continue to “enjoy the benefits of competition.” The BP-Amoco deal closed on the last day of December 1998.8
TOO GOOD TO BE TRUE
John Browne was scheduled to speak in February 1999 at a major industry conference in Houston. Two days before the conference, he called the organizers. He was very apologetic. Something urgent had come up in London and unfortunately he wouldn’t be able to make it. He would send one of his senior colleagues to read his speech in his place.
It was an excuse. The real reason was that Browne was scheduled to be the keynoter on Tuesday, and the keynoter on Wednesday was Michael Bowlin, the president of one of the major U.S. oil companies, ARCO. And Browne could not take the risk of being on the same program with Bowlin, not given what both were then engaged in.
A month earlier, in January 1999, Bowlin had called Browne from Los Angeles, which was ARCO’s hometown. Bowlin had a simple message: “We would like BP to buy ARCO,” he said.
Unlike Browne, Bowlin did appear at the Houston conference. His speech was on the future of natural gas, which was a little ironic: for Bowlin, it seemed, had concluded that oil did not have much future. Bowlin and the ARCO board had lost confidence in the company’s prospects. ARCO’s major asset was its share of the North Slope oil in Alaska, and with oil around $10 a barrel amid the price collapse, management worried that it would not be able to survive.
“It seemed too good to be true,” Browne later observed. ARCO “simply wanted to drop into the lap of BP.” This was a superb opportunity for BP, especially because of the efficiencies that would come through combining ownership and operatorship of their large North Slope oil resources. The North Slope was the largest oil field ever discovered in North America, but its production had fallen from a peak of 2 million barrels per day to a million, and a combined operatorship would save several hundred million dollars a year.9
If ARCO had hung on for another six weeks, it would have seen the beginning of a recovery in its fortune. For, in March 1999, OPEC started to cut back production, which in turn would begin to lift the oil price off the floor. But by then the deal was just about done. The purchase of ARCO for $26.8 billion by BP Amoco (as it was then) was officially announced on April 1, 1999.
“EASY GLUM, EASY GLOW”: EXXON AND MOBIL
The announcement of the BP-Amoco deal the previous August proved to be a historic juncture. The taboo against large-scale mergers had been broken, or so it appeared. Perhaps the greater risk, really, was to not merge.
Lee Raymond, the CEO of Exxon, was at a conference at the Gleneagles golf course in Scotland when the BP-Amoco announcement broke in August 1998. He knew exactly what he should do: get in touch with Lou Noto.
Raised in South Dakota, Raymond had joined Exxon after earning a Ph.D. in chemical engineering in three years from the University of Minnesota. His first jobs were in research. In the mid-1970s, he was drafted to work on a project for the CEO. The oil-exporting