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Financial Times: Investors seek BP safety assurances

By Kate Burgess and Rebecca Bream in London
Last Update: 4:05 PM ET Sep 14, 2006

Big shareholders in BP are seeking assurances from top executives and board members that recent mishaps and failings in the energy group’s safety record in the US are not symptoms of a systemic problem.

Morley Fund Management, its fifth biggest investor, is to meet members of BP’s board to assure itself that lessons have been learnt from last year’s fatal explosion at the Texas City refinery, and the oil leaks at Prudhoe Bay in Alaska that forced BP to shut production last month.

Other big investors have asked for one-to-one meetings with the board after BP’s shares fell 9 per cent since the start of August.

For the first time in three years BP’s market capitalisation has fallen below that of its rival Royal Dutch Shell. Rory Sullivan – the head of investor responsibility at Insight Investment Management, one of BP’s top 10 shareholders – said: “Following Prudhoe Bay there have been questions about the financial implications and whether [the failings] were systemic.

“Prudhoe Bay raises questions at the operational level about the role of senior executives and governance of the company”.

Another top 20 investor said: “There is a big issue for the board. It comes at a significant point in BP’s relations with investors. Every time these incidents have happened, BP has said the issues are not systemic.

“But investors have more doubts about this story than they’ve ever had before.”
BP has had a string of problems in recent years. In March 2005, an explosion at the Texas City plant killed 15 workers and injured hundreds more. Last month it closed its Prudhoe Bay oilfield because of serious corrosion in its pipelines.

The group was also responsible for an oil spill at Prudhoe Bay in March. BP’s trading practices are also being investigated in the US. The US Commodity Futures Trading Commission (CFTC), which regulates futures markets, is looking into BP’s crude oil trading, while the US Department of Justice is looking into some of BP’s gasoline trades. The DoJ’s investigation has been going on for more than a year. In June, BP was also accused by the CFTC of attempting to manipulate the market for propane, but BP has denied the allegations.

Shareholders stressed that there was no sense of animosity and said BP has an exemplary record for talking with investors. It initiated investor meetings after the Texas City blast, and in November it is to publish the findings of an independent panel on its safety culture.

Last week BP invited shareholders on the Responsible Investors Network to meet to discuss safety concerns. The company said: “We have regular meetings with investors at all levels, sometimes at their request and sometimes at ours. We wouldn’t comment on specific meetings”. Morley declined to comment. 

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