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BP has big challenges in US as Browne announces departure

Lord Browne is to retire as chief executive (CEO) of oil giant BP at the end of July 2007, over a year before he had said he would leave the company last year.

He will be replaced as CEO by Tony Hayward, currently BP's head of exploration and production. Peter Sutherland, BP's chairman, said Browne had decided that it would be in the company's interest to name a successor now in order to provide an orderly transition.

Sutherland said the board supported that decision and then concluded that a six month handover was more appropriate than a 18 month one. Paying tribute to Browne, Sutherland  said, "His performance over the past 12 years has been extraordinary, which is no doubt why he has constantly been named by his fellow CEOs as the most impressive businessman in Britain."

There had been considerable speculation that Browne would not last until the end of 2008 because of a series of reported problems including safety concerns at its US operations, following an explosion at its Texas City refinery in 2005, and the closure of Alaskan gas wells last year following leaks. Browne had committed investment to improve health and safety and in pipeline maintenance but questions over the the senior management began to surface more frequently. The independent safety review panel’s report into BP’s US oil refineries, which was published after Browne's departure was announced, provided, commentators agreed, a damning critique of its safety management.

The Panel’s main criticism was that prior to the Texas tragedy BP emphasised personal safety rather than process safety and it mistakenly interpreted improving personal injury rates as an indication of acceptable process safety performance at its US refineries.

Among the recommendations of the Panel was that BP should establish and implement an integrated and comprehensive process safety management system that systematically and continuously identifies, reduces, and manages process safety risks at its US refineries and that BP should involve the relevant stakeholders to develop a positive, trusting and open process safety culture within each US refinery. The Panel also recommended that the executive management and the board of directors of BP, including its chief executive should provide effective leadership on process safety. This had been lacking in the past, the Panel said.

BP said it accepted all of the Panel’s recommendations and Browne said that action had been taken on many of the recommendations over the past year as they corresponded with those of BP’s internal reviews. He admitted, however, there was still a lot of work to do. Plans will be developed to outline the further action the company needs to carry out.

The editorial in the Financial Times (17 January) wondered if it was time for BP’s board to be revamped as many of the non-executive directors had been there for more than a decade. Nils Pratley in The Guardian noted that while Browne is to leave BP the company can not walk away and it now has a hard job in the US to restore its reputation.
 

Links

BP

The Report of the BP U.S. Refineries Independent Safety Review Panel

Financial Times

The Guardian

February, 2007

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