British Petroleum and its chief executive, Lord Browne of Madingley, have long enjoyed a favourable image here in Britain. We take a degree of patriotic pride in the British roots of the world's third-largest energy company. Lord Browne has several times been voted by his peers as the most-admired British business leader.
His supporters cite the takeover of Amoco and Atlantic Richfield (when oil was relatively cheap) and BP's move into Russia in partnership with TNK in 2003 as evidence of his shrewdness. They point out too that a fivefold increase in profits in his 12 years in charge speaks for itself. Remarkably, BP has even managed to cultivate an environmentally friendly image through its counter- intuitive "Beyond Petroleum" branding exercise in 2000.
That's the image. But the reality, especially abroad, has been somewhat different. An explosion at BP's refinery in Texas City in March 2005 killed 15 people and injured more than 170 others. It was the worst industrial accident in America in a decade. The US Chemical Safety Board concluded in October last year that BP had known about safety lapses at Texas City years before, but nevertheless cut maintenance spending on the facility. Now, an internally commissioned report has reinforced that charge. BP stood accused yesterday of not providing adequate resources to ensure safety at its US refineries and its top management of failing to recognise concerns raised by lower-level employees in this area.
BP has had the worst safety record of all the oil majors in recent years. Tony Hayward, who has been named as Lord Browne's successor, seemed to argue on BP's internal website last year that this was related to the company's management ethos. He pointed out that the culture of doing more with fewer resources "needs to be deployed with great judgement and wisdom. When it isn't, you run into trouble." This sounds like a tacit admission that ruthless cost-cutting at BP has compromised safety.
Of course, profits are still gushing in. But this seems to owe as much to the high oil price resulting from chaos in the Middle East as to Lord Browne's managerial brilliance. BP's production has fallen for the sixth quarter in succession. Last year, a giant oil spill occurred at BP's Prudhoe Bay field in Alaska. BP has also been accused by US regulators of trying to manipulate fuel markets. Its shares have fallen 17 per cent in the past year.
Lord Browne is leaving his post in August, 18 months early, with a reported £14m pay-off and a £20m pension pot. It is hard to avoid the suspicion that, in the oil industry, as in some other areas of business, failure can be as generously rewarded as success.Reuse content