The Financial Times: BP orders worldwide overhaul after blast

By Carola Hoyos and Ed Crooks in London
Published: September 17 2006 22:02 | Last updated: September 17 2006 22:02

BP, Europe’s second-biggest listed energy group, is set to launch a root and branch review of its global operations in response to last year’s Texas City refinery blast, in which 15 people died.

The revamp, to be led by John Mogford, vice-president of safety and operations, is likely to take 5-10 years and is on a scale similar to the overhaul Exxon began after its huge oil tanker spill at Alaska’s port of Valdez in 1989.

Lord Browne, BP’s chief executive, has described the Texas City blast as a “fault line” that has forced the company to examine its entire operation.

“Very rarely do companies have tragedies of that scale. The last time BP had one was about 40 years ago. And it fundamentally changed the way we did business. I believe Texas City does that to us,” he said on a visit to Alaska last month.

The overhaul may help alleviate growing investor concerns which have seen five of the company’s leading shareholders, including F&C and Morley, seeking one-to-one meetings with management. Last week, the investors raised concerns that BP’s growing list of US troubles may indicate a systemic problem.

Exxon’s shake-up helped make it the world’s safest and financially successful energy group. After the 1989 spill, Exxon revamped its approach to safety, centralised its businesses and created an internal communications system that improved everything from financial prudence and physical caution to technological innovation.

BP’s planned reforms will involve standardising procedures worldwide and unifying the operations BP was unable to fully integrate after its US acquisition spree in the late 1990s.

BP stresses that this review will be a bottom-up approach involving management listening to local operations staff. Senior management are said to be concerned that a too swiftly implemented revolution could do more harm than maintaining the status quo. Mr Mogford’s team will include a staff of 45 with another 45 auditors.

BP has already instituted specific management changes in the US, including appointing Bob Malone as the region’s president. More changes are expected within the next few days.

The company faces investigations by the justice department and other US government agencies over trades it made in 2004, the Texas City fire, and the August shutdown of its Prudhoe Bay Field in Alaska because of corrosion.

On Sunday night it emerged Lord Browne may now be forced to give sworn videotape evidence for the civil cases arising from the Texas City explosion.

Related Article

Financial Times: Browne called to testify over refinery blast

By Sheila McNulty in Houston
Published: September 17 2006 22:02 | Last updated: September 17 2006 22:02

Plaintiffs’ lawyers who earlier agreed not to call Lord Browne, BP’s chief executive, to testify in the civil cases arising from last year’s fatal Texas refinery explosion, said they now intended to question the head of the UK oil group.

Tony Buzbee, lead plaintiff for three of the first five cases set for trial, told the Financial Times he would notify federal and state court today that plaintiffs’ attorneys will seek sworn videotape testimony from Lord Browne to be used in the trial.

Mr Buzbee said he would ask Lord Browne about BP’s practices across the US, including Alaska, where the company had to shut half its oilfield because of severe corrosion, to determine whether the company has a pattern of neglect, under-funding and under-investment. “There is a whole bevy of topics I want to bring up with Lord Browne,’’ Mr Buzbee said.

BP had unsuccessfully argued to state court that Lord Browne should not be required to testify because he had no unique knowledge about the refinery.

Mr Buzbee said he had originally decided against pursuing Lord Browne, despite a state court ruling that plaintiffs had a right to obtain the executive’s sworn testimony, because there was limited time, as the case was to begin this week.

However, the state court late on Friday granted BP’s request to delay the trial until November so it could better prepare. The federal case has yet to receive a trial date.

BP had argued that it needed more time after plaintiff’s attorneys alleged BP had wrongly told state regulators, in a 2003 application for an emissions permit, that it had installed updated equipment investigators said would have prevented the explosion that killed 15 and injured an estimated 500.

In the application, a copy of which was filed with the court on Friday, BP said: “Relief valves are routed to a flare; therefore, 100 per cent [emissions] control credit is applied.’’

But it was only after the refinery exploded that BP asked regulators for permission to replace the outdated blowdown stack on the refinery’s ISOM unit with a flare.

A blowdown stack is a tank with an open stack through which emergency releases are made.

BP denies and wrong-doing, and says its focus is on settling.

There are roughly 550 outstanding death, injury and property damage cases against BP, which has settled about 650 other cases arising from the explosion.

Copyright The Financial Times Limited 2006