Dudley set to take over at BP but City predicts he will not last

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Bob Dudley, the American BP executive widely tipped to take over from the embattled Tony Hayward, is not expected to hang on to the top job for more than a couple of years.

Mr Hayward's departure as the oil company's chief executive has been the subject of intense speculation since the Deepwater Horizon explosion in April killed 11 people and unleashed the worst oil slick in US history.

In advance of this morning's second-quarter financial results, BP refused to comment on reports that Mr Hayward would receive a £12m severance package and be replaced by Mr Dudley. But by last night, with speculation at fever pitch and rumours that Mr Hayward was to be consoled with a seat on the board of the Russian joint venture TNK-BP, only the formal confirmation of Mr Dudley's promotion was lacking, and the City was already thinking about what will happen next.

"The question for BP's board was whether to trawl the industry for Tony Hayward's replacement, or just find the easiest option and then worry about the next CEO in a year or two's time," one source said yesterday. "There are clearly several suitable candidates in the oil and gas industry, and BP is going for the easy one."

Mr Dudley is a 30-year veteran of the oil industry who has worked for BP for the past 12. He is currently the group's managing director and, after a string of public relations gaffes turned Mr Hayward into "public enemy No 1" in the US, he has also taken over the day-to-day running of efforts to contain the oil spill in the Gulf of Mexico. Few people in the business question his skills. "Bob Dudley has a very good ability to deal with very difficult positions," one insider said yesterday. "He is very good at complex political situations."

But his most compelling qualification is that he is American. As recently as BP's March strategy presentation, Mr Dudley was looking like yesterday's man, according to City insiders. After a headline-grabbing performance as chief executive of TNK-BP – when disputes with the venture's billionaire co-owners forced him to run the business from secret locations outside Russia – he was increasingly overshadowed by BP's head of refining and marketing, Iain Conn, and head of exploration and production, Andy Inglis.

But as Mr Hayward grew increasingly unpopular, and irate Americans from Louisiana to Capitol Hill started calling the company "British" Petroleum as a term of abuse, Mr Dudley's star was back on the rise. Not just American, he grew up just 80 miles north of the Gulf coast and has a natural affinity with the region, last month describing the slick as "painful and emotional, and shocking".

If BP is to maintain its US business, which constitutes 40 per cent of the group's assets, such empathy is vital. "There is some window dressing here," Malcolm Graham-Wood, a director at Westhouse Securities, said yesterday. "In order to stay in the Gulf of Mexico, what BP needed more than anything was an American to take over as CEO."

As chief executive, Mr Dudley would face a string of challenges. Assuming Mr Hayward stays on until relief wells are completed, Mr Dudley's immediate task would be to deal with the legal and financial fallout from the disaster. He would also have to decide the shape of a company committed to selling off $10bn (£6.5bn) of assets to help set aside $20bn for compensation.

He would have to rehabilitate the company's image in the US, which is already tarnished by the Texas City refinery disaster that killed 15 people in 2005. Such rehabilitation will likely need a thorough review of BP's safety procedures.

And at the same time, the new boss will also need to find ways to boost the shattered morale of both BP's rank-and-file staff and its beleaguered management team.

It is a daunting list. "A huge amount has to happen in the next year or two in reshaping the business," Mr Graham-Wood said. "Bob Dudley is an industry lifer who has done hard graft in TNK-BP but this will probably be a short-dated chief executiveship."

BP may also expect a new chairman. Carl-Henric Svarnberg, though not set to step down tomorrow, is not expected to outlast Mr Hayward for long.

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