Wednesday, August 4, 2010

BP Envisions Leaner Future Under Its New Chief : The New York Times


BP Envisions Leaner Future Under Its New Chief

Toby Melville/Reuters
From left, BP Chief Executive Tony Hayward, Chairman Carl-Henric Svanberg and Managing Director Bob Dudley outside BP’s headquarters in London on Tuesday.

LONDON — Three months after its giant oil spill in the Gulf of Mexico, a chastened BP outlined a new strategy on Tuesday to revamp operations and practices around the world and turn it into a leaner operator under a new leader.
Adam Hunger/Reuters
Robert Dudley is to become BP’s first non-British chief executive at the beginning of October, replacing Tony Hayward.
But even as BP increased the money set aside for spill-related costs to $32.2 billion, executives reiterated that the April 20 Deepwater Horizon explosion was not a result of gross negligence by the company. BP said it would release the results of its investigation in a report next month.
“It is clear that this accident was the result of multiple equipment failures and human mistakes involving many companies,” said Tony Hayward, who is stepping down as BP’s chief executive after criticism of his handling of the spill.
BP said it planned to sell $25 billion to $30 billion in exploration and production assets within the next 18 months, or as much as 13 percent of its production assets around the world. The planned sales represent a sharply higher target than BP’s previous goal of selling $10 billion in assets to help pay for the spill.
The new strategy will be led by an American executive,Robert Dudley, who worked for Amoco until BP bought it in 1998. BP said Mr. Dudley would take over as chief executive on Oct. 1, after a two-month transition period.
“We will look at what we have learned from this incident. We will look at our culture and our safety and operations,” Mr. Dudley said in a telephone interview with a small group of reporters. “We are looking at a slimmer company, not a smaller company.”
BP’s allocation of $32.2 billion for spill costs led to record loss of $17 billion for the second quarter. That compared with a $4.4 billion profit in the quarter a year ago.
The new strategy reverses years of rapid growth at BP, which transformed itself in recent years from a middle-size European company into a rival ofExxon Mobil, overtaking Royal Dutch Shell.
BP said the planned asset sales would be focused mainly on its upstream business, which includes oil and gas production platforms, and leave it with a smaller portfolio of higher-quality exploration and production assets.
“They are trying to draw a line under this and get Bob a clean sheet to move forward,” said Nick McGregor, investment manager at Redmayne-Bentley, a stock brokerage firm in Britain. “But the difficulty is that the litigation challenge persists.”
The company’s global production assets — which do not include its refining or marketing business — are worth about $230 billion, according to estimates by J. P. MorganCazenove.
BP has already agreed to sell gas fields in Canada, Egypt and Texas to Apache for $7 billion, and is negotiating the sale of its operations in Vietnam and Pakistan, Mr. Hayward said. It is also seeking buyers for its 60 percent stake in Pan American Energy, an Argentine oil company, as well as part of its 25 percent holdings in the Prudhoe Bay field in Alaska, which it operates.
Evgeny Solovyov, an analyst at Société Générale in London, said the company might also consider the sale of operations in Colombia or its stake in the Russian oil companyRosneft, which is worth about $1 billion. “The latest deal with Apache showed that they could get quite some good deals,” Mr. Solovyov said.
Investor reactions were mixed. BP’s shares were down about 1 percent at midday in New York on Tuesday, paring some of their gains from the previous day, when directors met to discuss the leadership changes. The shares have lost about 35 percent of its market value since the April 20 explosion of the Deepwater Horizon rig, which killed 11.
Mr. Dudley, 54, grew up in Mississippi and has been in charge of BP’s response to the spill for the last month. His appointment was widely expected among analysts and investors, who are hoping that he can help repair BP’s reputation in the United States.
He pledged that BP would stick with its commitments in the Gulf of Mexico, which includes cleaning up the oil and compensating residents. The United States is critical to the company, accounting for about a third of its business and 40 percent of its shareholders and employees.
“Getting it right, and working and cooperating with investigators in the United States is vital to BP’s future success in America,” Mr. Dudley said in a conference call with analysts.
During an earlier briefing in London, he said, “We will fulfill the promises we’ve made. Meeting our commitments is critical for BP’s long-term success. Taking over this role, I will not reduce my commitment in the region. It’s not our intention to exit the U.S., nor do we believe we will have to. We fully intend to maintain those businesses and restore our position in the gulf.”
To increase its financial flexibility, BP plans to reduce its debt, now about $23 billion, to $10 billion to $15 billion within 18 months.
Mr. Hayward angered American policy makers and gulf residents with the way he handled the spill. He is the second BP chief executive to leave after a major accident. His predecessor, John Browne, resigned in 2007 when he lost the support of the board after a string of setbacks including a blast at its Texas City, Tex., refinery in 2005 and leaking oil pipelines in Alaska.
When he leaves, Mr. Hayward, 53, is entitled to one year of salary as severance, worth a little more than £1 million, or about $1.6 million. He will also get an annual pension of £600,000, or about $932,000, from a fund worth about £11 million, which he amassed over the 28 years he worked for BP.
BP said it planned to nominate Mr. Hayward as a nonexecutive director of TNK-BP, its Russian joint venture.
Mr. Hayward is still running the company, but in various presentations to analysts and reporters Tuesday, he frequently deferred to Mr. Dudley about BP’s future strategy.
Mr. Hayward said his departure would allow BP to repair its reputation. “It’s a very sad day personally,” he said. “I love this company and everything that it stands for. For it to move on, particularly in the U.S., it needs a new leadership.”
Asked how he felt about the oil spill, given his pledge to improve safety after the Texas City explosion, Mr. Hayward told reporters that the company had worked hard to improve its safety standards in the last three years.
But, he added, “sometimes you step off the pavement and get hit by a bus.”

Julia Werdigier reported from London and Jad Mouawad from New York. Clifford Krauss contributed reporting from Houston.

U.S. Finds Most Oil From Spill Poses Little Additional Risk:The New York Times


U.S. Finds Most Oil From Spill Poses Little Additional Risk

Jeff Haller for The New York Times
Nearly 36,000 tons of oily debris had been collected from shorelines through Sunday. Above, near the shore in Port Fourchon, La.

WASHINGTON — The government is expected to announce on Wednesday that three-quarters of the oil from the Deepwater Horizon leak has already evaporated, dispersed, been captured or otherwise eliminated — and that much of the rest is so diluted that it does not seem to pose much additional risk of harm.

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A government report finds that about 26 percent of the oil released from BP’s runaway well is still in the water or onshore in a form that could, in principle, cause new problems. But most is light sheen at the ocean surface or in a dispersed form below the surface, and federal scientists believe that it is breaking down rapidly in both places.
On Tuesday, BP began pumping drilling mud into the well in an attempt to seal it for good. Since the flow of oil was stopped with a cap on July 15, people on the Gulf Coast have been wondering if another shoe was going to drop — a huge underwater glob of oil emerging to damage more shorelines, for instance.
Assuming that the government’s calculations stand scrutiny, that looks increasingly unlikely. “There’s absolutely no evidence that there’s any significant concentration of oil that’s out there that we haven’t accounted for,” said Jane Lubchenco, head of the National Oceanic and Atmospheric Administration, the lead agency in producing the new report.
She emphasized, however, that the government remained concerned about the ecological damage that has already occurred and the potential for more, and said it would continue monitoring the gulf.
“I think we don’t know yet the full impact of this spill on the ecosystem or the people of the gulf,” Dr. Lubchenco said.
Among the biggest unanswered questions, she said, is how much damage the oil has done to the eggs and larvae of organisms like fish, crabs and shrimp. That may not become clear for a year or longer, as new generations of those creatures come to maturity.
Thousands of birds and other animals are known to have been damaged or killed by the spill, a relatively modest toll given the scale of some other oil disasters that killed millions of animals. Efforts are still under way in Louisiana, Mississippi, Alabama and Florida to clean up more than 600 miles of oiled shoreline. The government and BP collected 35,818 tons of oily debris from shorelines through Sunday.
It remains to be seen whether subtle, long-lasting environmental damage from the spill will be found, as has been the case after other large oil spills.
The report, which is to be unveiled on Wednesday morning, is a result of an extensive effort by federal scientists, with outside help, to add up the total volume of oil released and to figure out where it went.
The lead agency behind the report, the oceanic and atmospheric administration, played down the size of the spill in the early days, and the Obama administration was ultimately forced to appoint a scientific panel that came up with far higher estimates of the flow rate from the well. Whether the new report will withstand critical scrutiny is uncertain; advocacy groups and most outside scientists had not learned of it on Tuesday.
The government announced early this week that the total oil release, from the time the Deepwater Horizon exploded on April 20 until the well was effectively capped, was 4.9 million barrels, plus or minus 10 percent. That estimate makes the Deepwater Horizon disaster the largest marine spill in history. It is surpassed on land by a 1910 spill in the California desert.
As the scientists did their calculations, they were able to rely on direct measurements of the fate of some of the oil that spewed from the broken well. For example, BP and its contractors succeeded in capturing about 17 percent of it with various containment mechanisms, the report says.
The outcome for much of the oil could not be directly measured, but had to be estimated using protocols that were scrutinized by scientists inside and outside the government, Dr. Lubchenco said.
The report calculates, for example, that about 25 percent of the chemicals in the oil evaporated at the surface or dissolved into seawater in the same way that sugar dissolves in tea. (The government appears to have settled on a conservative number for that estimate, with the scientific literature saying that as much as 40 percent of the oil from a spill can disappear in this way.)

Clifford Krauss contributed reporting from Houston, and Campbell Robertson from New Orleans.


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