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Financial Times: BP’s safety failures are not yet resolved

Published: January 16 2007 18:26 | Last updated: January 16 2007 18:26

Another month, another Baker report. December’s report from the Iraq Study Group, co-chaired by James A. Baker III, former US secretary of state, has been largely ignored by America’s president. But the management of BP, the oil giant, must not ignore Tuesday’s report from a panel chaired by Mr Baker into the safety and management of the company’s US operations.

The independent panel was formed on the recommendation of a safety watchdog investigating the explosions at BP’s Texas City refinery, which killed 15 workers and injured 500 more in March 2005. The panel looked at safety culture across BP Products North America, not just at Texas City, reflecting other accidents, including some at BP’s Alaskan operations.

The Baker panel found that BP “has not provided effective process safety leadership”, that “material deficiencies in process safety exist at BP’s five US refineries” and that “BP’s executive management either did not receive refinery-specific information on process safety deficiencies … or did not effectively respond to the information that it did receive”.

That is a damning verdict. The panel’s conclusions suggest that BP’s executives were most at fault, but the board of directors does not escape. The board relied on information about safety given to it by management. But, implies the report, the board did not question that information. As a result it failed to ensure that effective management systems for process safety were actually put in place.

When management failures lie behind a tragedy on the scale of Texas City there must be accountability. BP has convened the Baker panel and conducted a thorough review of its own safety procedures: for that it deserves applause. Lord Browne, the company’s iconic chief executive, announced last week that he will step down a year earlier than planned.

For Lord Browne, who as CEO must bear ultimate responsibility, the safety failures are a blot on an otherwise stellar career. But his departure does not draw a line under the Texas City disaster. The executives in charge of BP’s North American refineries should consider their positions. The boardroom, meanwhile, where many non-executives have been in place for almost a decade, needs to be revamped.

There should be no schadenfreude inside other companies. Instead they should realise that, despite increased board-level scrutiny of financial affairs in the wake of the Enron scandal, businesses face other grave risks. At an industrial company, safety is one. Non-executives need to start asking the right questions.

The Baker panel goes on to set out how BP can improve its process safety: through better management, monitoring, accountability and, most important of all, leadership. If BP and others follow that advice, it will be a big step towards better industrial safety.

Copyright The Financial Times Limited 2007

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