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The Times: Chief putting the petroleum back into BP

October 12, 2007
James Harding, Business Editor

A leadership change took place at two great British institutions over the summer. When Gordon Brown moved in at No 10, he implicitly disparaged his predecessor but he has so far failed to set out a clear vision of his plans for high office. Tony Hayward, the new boss at BP, called for an end to the complexity and bureaucracy at BP, thereby rubbishing the legacy of the former chief and for years Britain’s most admired businessman, Lord Browne of Madingley.

But unlike the Prime Minister, Mr Hayward has quite clearly set out his stall. BP is Back to Petroleum.

Britain’s oil giant is returning to the fold and quietly shedding its emphasis on alternative energies. Mr Hayward, it seems, is more focused on value investors than environmental campaigners.

BP produces 3.8 million barrels per day. ExxonMobil, the US giant that, in the age of the Inconvenient Truth, has continued, inconveniently, to describe itself as a hydrocarbons company, produces a little more, 4.2 million. But the stock market “values” each BP barrel at $59 while an Exxon barrel is worth $122.

And Mr Hayward is setting out to make BP resemble Exxon, not The Body Shop. After years of resting on its laurels, BP yesterday acknowledged that by any investment criteria it has lagged its peers. He signalled thousands of job losses in the next couple of years to improve efficiency and margins.

Critics will say that Mr Hayward was as much part of the Browne regime as Mr Brown was part of Tony Blair’s government. Was the former BP chief executive so overweening and his line managers so weak and supine that they could not have improved efficiencies within the business before now?

Still, Mr Hayward has brought a welcome clarity and a much-needed emphasis on execution after just five months at the helm of BP. He is stripping down BP to its essentials. The company is being taken back to its roots: this is a business that finds oil and gas and turns it into good fuel for your car or your cooker.

Three divisions are to become two: upstream and downstream. The third, “Alternative Energy”, is not even a business segment.

Of course, BP will continue to build wind turbines, make solar cells and dabble in bioenergy. It will keep the “Beyond Petroleum” slogan — the practical Mr Hayward knows how fond the public is of the tagline and how inspiring it is to his own 97,000 staff. Some $8 billion will be spent in ten years. It’s a pittance — BP spends $15 billion on its upstream projects in one year.

For many on BP’s front line in Alaska, the Gulf of Mexico and in its US refineries, this return to the petrol pump will be a great relief.

But for the world outside and the climate change lobby, who have long seen BP not just as a big oil company, but a good one, this is a brutal reality check.

http://business.timesonline.co.uk/tol/business/columnists/article2641410.ece

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