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Financial Times: BP Shell Merger Row: Shell refused to comment on Tuesday night.

Headline: Sutherland triumphs in BP power play
By Carola Hoyos, Energy Correspondent

Published: July 25 2006 22:00 | Last updated: July 26 2006 00:47

Peter Sutherland, chairman of BP, on Tuesday stamped his authority on the UK energy group by forcing Lord Browne, its widely admired chief executive, to announce he would retire at the end of 2008.

Echoing words used by Mr Sutherland in private, Lord Browne said on Tuesday that “a company isn’t about one person”.

The two men had feuded over the announcement, with Lord Browne reluctant to commit himself to a departure date. On Tuesday they reached a compromise in which Lord Browne promised to go but extended his stay to the end of 2008, rather than February 2008, when he turns 60.

However, even as the company was trying to draw a line under the row, lingering tensions between the two camps resurfaced, particularly over a now-abandoned plan for BP to pursue a merger with Royal Dutch Shell, the company’s European rival.

People close to Mr Sutherland and Lord Browne denied that the idea – resisted by the chairman and other board members – fuelled tension between the two.

The move, described earlier this week by sources close to Lord Browne as a “significant potential merger”, was on Tuesday officially dismissed as nothing more than “scenario planning”.

A senior BP executive said there was never a serious proposal, while another said that Shell had not been prepared to discuss the idea when it was being floated by executives in the latter half of last year.

However, two insiders said the idea of a transformational merger had been closed by Mr Sutherland.

Shell refused to comment on Tuesday night.

On Tuesday Lord Browne gave an unequivocal pledge to leave BP on December 31 2008, adding that he would decline to stay on, even if the board requested it. He denied a rift with his chairman, saying the reason for his going was not age but tenure.

The tensions between Mr Sutherland and Lord Browne have raised questions over how much power the chief executive will exert in his remaining two and a half years. Friends had mounted a weekend campaign designed to extend his tenure after Mr Sutherland had told him to “end the uncertainty” over his plans.

BP on Tuesday reported record net replacement cost profit of $6.1bn, a 23 per cent rise on last year. BP America will get an advisory board for safety, compliance and regulatory affairs and an extra $1bn – on top of $6bn – to improve operational standards and monitoring. BP also said it would hire external auditors to ensure compliance at its trading operations.

Additional reporting by Toby Shelley in London

Copyright The Financial Times Limited 2006

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