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The Independent (UK): BP’s Lord Browne faces toughest test

EXTRACT: Like Shell before it, which is only now recovering from the reserves reporting scandal which laid it low three years ago, BP is discovering that once on the treadmill of bad news, it becomes difficult to step off. Like Shell, too, the pain has largely been self-inflicted.

THE ARTICLE

By: MICHAEL HARRISON, The Independent – United Kingdom
Published: Jan 10, 2007

Things go from bad to worse for Lord Browne. Not only does BP’s chief executive have to contend with falling oil production, even the weather is conspiring against him. The abnormally mild spell in America may be good news for New York sun-worshippers, but for BP’s very own Sun God it has meant a 12 per cent decline in the price of the commodity he trades since the start of the year. The short sellers scent that oil is a one-way bet for now, so there may be more pain to come for the likes of BP.

In not-so-distant times, BP would have been able to shrug off falling oil prices and even the odd production blip. But Lord Browne and his company are on a roll of the wrong kind. Output from the once mighty BP machine has now fallen for six straight quarters and, while it may not be alone among Western oil majors in struggling to grow production, it is bearing the brunt of the market’s disillusionment. Like Shell before it, which is only now recovering from the reserves reporting scandal which laid it low three years ago, BP is discovering that once on the treadmill of bad news, it becomes difficult to step off.

Like Shell, too, the pain has largely been self-inflicted. Since the Texas City refinery explosion almost two years ago, pretty much everything has gone wrong. BP has been accused of rigging the propane market in the US, and the Prudhoe Bay field in Alaska has sprung a disastrous leak. Meanwhile, the BP board itself has been riven with dissent over Lord Browne’s failed attempt to hang on long beyond his retirement age.

Even so, he is still slated to remain as chief executive for the best part of two years. The glory days of the late 1990s, when Lord Browne exploited the weak oil price to pull off a series of daring takeovers in America to create the BP we see today, seem to belong to another era altogether. Even the TNK purchase in Russia, an exquisitely timed deal of more recent vintage, feels like a distant memory. Managing the business out of adversity would arguably be an even greater achievement. Right now, however, December 2008 could probably not come quickly enough for Lord Browne.

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