BP and Reliance

BP and Reliance Industries are both powerhouses in their own fields. BP’s new CEO, Tony Hayward, has just given his first interview in the new job. Comparing, and contrasting, his comments with last week’s AGM statement by Reliance’s Chairman, Mukesh Ambani, is very revealing in terms of content as well as tone.

Hayward’s interview in the Financial Times showed him as making a decisive break with the Lord Browne era. He believes that the company had done a ‘fantastic job assembling a great set of assets, but a much poorer job in really making them run efficiently’. He also ‘admitted that morale at BP was poor, and that the company had been failing to recognise and reward excellence among its employees’.

Over the same period, of course, BP has divested much of their petchems business via the Innovene sale to INEOS. But according to Hayward, they have still managed to ‘increase the complexity of BP’s structure’, as a result of which ‘it is so tough to get things done’ within BP.

Ambani, of course, had no need to eat humble pie. He titled his talk ‘Towards a quantum leap’, and in it he set out the major changes now underway in Reliance’s portfolio. From small beginnings with a single polyester plant, Reliance is now the world leader. And Ambani announced a move from 1.9 MT to 4.5 MT of PX capacity, in association with the refinery expansion at Jamnagar.

The site will also feature 2 MT of new olefins capacity, with further expansion already planned. Ambani explained that the petchem business now aims to ‘follow the path to global leadership set by the polyester business’. Reliance has also become one of the top 20 private upstream companies in the world, and he revealed that they are now planning to invest a further $4bn to build on the success of the past 7 years.

But even Reliance now needs to make a number of major strategic shifts. Ambani accepts, for example, that although they have been able to focus on organic growth to date, ‘acquisition’ will have to become a more important part of their growth process. He also accepts this will require a shift in mind-set, towards ‘partnership’ and more JVs of the type carried out with Chevron in the Jamnagar refinery expansion.

What is interesting about both Hayward and Ambani’s viewpoints is the stress that they lay on operational expertise. Reliance’s success to date, like BP’s in the past, has been based upon their ability to deliver. To recapture excellence in this area must be Hayward’s objective for BP, if he is to achieve the turnaround he targets.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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