20 April 2011 15:28 [Source: ICIS news]
By Brian Ford
HOUSTON (ICIS)--BP’s top executives told shareholders last week that the energy major differs substantially from the company that existed before last year’s Deepwater Horizon explosion in the Gulf of Mexico.
After a year of “crises, almost unprecedented in corporate history”, BP’s leadership has “reset the company” and is now “doing things differently”, said company chairman Carl-Henric Svanberg at BP’s annual shareholder meeting.
“BP is going through fundamental change,” Svanberg told shareholders. “We have a new organisation. An organisation which is functionally based rather than asset based. An organisation which has a strengthened safety and operations function.”
The Macondo well off the coast of Louisiana blew out on 20 April 2010, killing 11 people and sinking the Deepwater Horizon rig, leading to the largest oil spill in Gulf history.
The tragedy blasted BP’s public reputation, led to the resignation of BP chief executive Tony Hayward and caused the energy giant to pay out billions of dollars in compensation and environmental restoration projects.
BP had set aside a total of $40.9bn (€28.6bn) to cover the costs of the disaster and had paid $17.7bn as of 31 December. It plans to divest more than $30bn in assets by the end of 2011 to help cover the costs.
The UK-based oil giant suffered its first annual loss in almost 20 years during 2010, reporting a full-year replacement cost loss of $4.9bn, compared with a replacement cost profit of $13.9bn in 2009.
The disaster also put a serious dent in BP’s market value, as shares of the company fell from more than $60/share on the day of the blast to just over $27/share on 28 June. Shares have since climbed to $44.96 as of 15 April.
The company suspended quarterly dividends in June as access to liquidity became more expensive, but plans to restore the payments this year, albeit at a lower level.
A US presidential commission that investigated the explosion and oil spill laid blame at the door of BP and its two subcontractors, Halliburton and Transocean, and criticised those companies for their management failures and the proximate cause of the rig fire and resulting Deepwater well leak. But the commission also said the disaster was the result of “inexplicable decisions amid a cult of complacency on the part of both government and the industry”.
The commission recommended a number of regulatory changes, including raising the current $75m liability cap for companies involved in oil spills and revamping offshore oil regulatory authority at the Department of the Interior.
BP agrees with the commission’s conclusion that it is not solely to blame and says it was “the result of multiple causes, involving multiple parties”.
BP chief executive Bob Dudley said the company is “systematically implementing the lessons we have learned from the incident”, with the creation of a company safety and risk management organisation, whose leader reports directly to the chief executive.
The safety organisation is already intervening where needed to stop operations and bring about corrective actions, including shutting in a production platform to repair the fire water pumps and shutting down a producing field to allow pipeline integrity work to be done, according to Dudley.
“We have also decided we will not accept rigs that do not conform to our standards and there are a number of cases where we have either turned away rigs or are negotiating for modifications to bring them fully up to our standards,” Dudley added.
Looking to the future, the company continues to invest in deepwater exploration across the globe and even the Gulf of Mexico, according to Dudley, noting that before April 2010, the oil giant had drilled safely in the deep waters of the Gulf for 20 years.
The world continues to hunger for more energy. BP estimates that energy demand will grow by as much as 1.7% per year and its outlook for 2030 projects that 93% of that growth will come from emerging economies.
In the wake of the Deepwater Horizon disaster, several bills emerged in Congress last year that would have increased offshore worker safety and environmental standards, but much of that legislation appears to have stalled.
The Obama administration said in December that it would not issue new oil and gas exploration leases in any US offshore areas other than those already under development in the Gulf of Mexico and along a limited part of Alaska’s coast, and none of those regions until 2012.
But amid rising oil and gasoline prices, new measures are coursing through the Republican-controlled House of Representatives that would speed up oil and gas production in the US, in part by forcing lease sales in new areas.
($1 = €0.70)
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