3:39 AM
Dudley faces delicate task in rebuilding BP
Addison Ray
By Tom Bergin
LONDON | Tue Sep 28, 2010 3:29am EDT
LONDON (Reuters) - Bob Dudley faces a delicate task when he becomes chief executive of BP Plc on Friday: convincing investors BP will boost safety, while persuading government and the courts that its safety regime is as good as any in the industry.
Tens of billions of dollars are at stake.
BP has suffered three major safety accidents in recent years, including the 2005 Texas City blast which killed 15 workers, oil leaks in Alaska in 2006 and the explosion on the Deepwater Horizon rig in April which killed 11 men and caused the United States' worst ever oil spill.
Investors see a pattern, and are worried.
"Dudley really needs to restore trust in the operational ability ... That's the absolute top priority," Adrian Jackson, fund manager at Investec, said.
BP accepted the Alaskan leaks were partly due to cost cutting but denied economies played a role in either Texas City or the April 20 rig blast, instead blaming mistakes which were the result of practices common across the oil industry.
But investors, sore at the loss of $65 billion in BP's market value due to the oil spill, want evidence of change.
"We will want to see what are they doing to tighten things up," Jackson added.
ILL ADVISED
When a new CEO takes over an underperforming company, he or she often damns their predecessor's failings and promises change -- as Tony Hayward did when he succeeded John Browne atop BP, saying the latter had lost sight of day-to-day operations.
However, lawyers said American Dudley would be ill advised to adopt this strategy. To admit to shortcomings in BP's safety practices or even to promise a major overhaul could be seen by regulators or represented by trial lawyers as admissions BP was to blame for the oil spill, inviting huge liabilities.
BP, Europe's second-largest oil group by market value, capped the leaking well on July 15 after it gushed almost 5 million barrels of crude into the sea.
The most immediate matter on Dudley's plate is how he will deal with official investigations and lawsuits over the spill. Critically, BP must refute claims it was grossly negligent.
If it is successful, its partners in the blown-out well, including 25 percent owner Anadarko and 10 percent owner Mitsui , will be forced to share up to 35 percent of the cost of plugging the leak, cleaning up and compensating those affected.
Analysts estimate the total cost will exceed $30 billion.
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