BP Is Expected to Replace Chief With American

BP Is Expected to Replace Chief With American
By JAD MOUAWAD and CLIFFORD KRAUSS
Copyright by The Associated Press
Published: July 25, 2010
http://www.nytimes.com/2010/07/26/business/global/26bp.html?_r=1&th&emc=th


BP’s board is expected on Monday to name an American, Robert Dudley, as its chief executive, replacing Tony Hayward, whose repeated stumbles during the company’s three-month oil spill in the Gulf of Mexico alienated federal and state officials as well as residents of the Gulf Coast.

The planned appointment of an American to run the London-based company, which was confirmed by a person close to BP’s board, would underscore how vital the United States has become to BP. About one-third of the company’s oil and gas wells, refineries and other business interests are in the United States, and 40 percent of its shareholders are Americans.

The move would also be a recognition by the board that even though the oil has stopped spewing into the gulf, dealing with the consequences of the Deepwater Horizon accident — from tens of billions of dollars in claims to possible criminal charges and new regulations on offshore drilling — is likely to dominate the company’s agenda for years.

“It is in the best interest of the company to go forward with fresh leadership,” said the person close to the board, who spoke on the condition of anonymity because he was not authorized to discuss the changes.

Mr. Dudley, 54, who grew up in Mississippi and spent summers fishing and swimming on the gulf, has been in charge of BP’s response to the spill for the last month. Before that, he was best known for running the company’s joint venture in Russia, where he butted heads in 2008 with BP’s business partners and the Russian government over control of the operation.

These experiences could help him in his new job, which will require consummate political skills to convince everyone, from President Obama to idled fishermen, that BP can be trusted to fully pay for the cleanup and safely drill and operate deepwater wells.

Kenneth Feinberg, the independent administrator managing the $20 billion claims fund that BP set up under pressure from the White House, was effusive in his praise for Mr. Dudley.

“He is cool, calm, collected,” Mr. Feinberg said. “He is proactive. He reached out to me and expressed the desire for BP to be as responsive and cooperative as possible.”

Obama administration officials declined to comment on Sunday about the management changes until they are made public.

According to the plan being presented to the board, Mr. Dudley would ascend to the top job on Oct. 1, allowing for a transition period. The change would be publicly announced on Tuesday, when BP releases second-quarter financial results and Mr. Hayward talks to shareholders about the company’s post-spill strategy.

It is unclear whether Mr. Dudley, who joined BP in 1998 when it acquired Amoco, can drive the fundamental cultural change that many analysts and even some company insiders say that BP badly needs.

However, oil companies rarely go outside their ranks for top leaders, and analysts pointed out that Mr. Dudley is untainted by the major operating problems that BP has suffered in recent years, including an explosion at a Texas refinery, pipeline problems in Alaska, and the Deepwater Horizon accident, which killed 11 people and released millions of gallons of oil into the gulf.

“He is basically a guy with a clean slate,” said Fadel Gheit, a veteran oil analyst at Oppenheimer & Company.

Inside BP, Mr. Dudley faces the challenging task of improving the morale of shaken employees while reforming a stubborn culture of excessive risk-taking that placed speed and profits ahead of safety.

Daniel Yergin, the chairman of IHS Cambridge Energy Research Associates, said that Mr. Dudley faces an enormous set of challenges.

“The company needs to reset its direction and restore confidence both externally and within the organization,” said Mr. Yergin, who has known Mr. Dudley for years. “In Russia, he was working in a very high-pressure environment, and he demonstrated his ability to stay focused. He’s very steady and he knows how to work with a wide range of people to get the job done.”

Mr. Dudley, a chemical engineer by training, joined Amoco in 1979. Before running TNK-BP, where he increased oil production by 26 percent and increased reserves by 138 percent, he was responsible for BP’s production and exploration business in Russia, the Caspian region, Angola, Algeria and Egypt. Earlier in his career, he ran BP’s renewable-energy business. He was appointed to BP’s board in 2009.

Mr. Dudley had been considered for the top job in 2007, but he lost to Mr. Hayward, a geologist by training, who promised at the time to make safety his top priority.

But Mr. Hayward’s handling of the Deepwater Horizon disaster — including his notorious comment that “I’d like my life back” — infuriated Gulf Coast residents and government officials alike. He was forced out of the spotlight last month after members of Congress accused him of stonewalling during testimony.

Mr. Hayward is still negotiating his severance package. He is entitled to at least a year’s salary, equivalent to about $1.6 million, as well as a pension built up from 28 years at the company, which would be worth about $11 million when he reaches retirement age.

BP declined to comment about any pending management changes. In a statement, the company said: “Hayward is our chief executive. He has the full support of the board.”

Chris Ruppel, managing director for capital markets for Execution Noble, an international investment bank, said Mr. Dudley was “very, very good at dealing with political issues,” as he proved in Russia. Even though BP had to cede control of the Russian venture, it still owns 50 percent of the venture and has avoided the fate of investors in other projects who were forced to sell out.

Now, BP is seeking to move on from the spill, especially after it recently finally managed to stem the flow of oil with a new cap. After a tropical storm briefly delayed work over the weekend, the company is resuming work to permanently shut the well, which it hopes to complete within the next few weeks.

Last week, it negotiated the sale of some of its assets in Texas, Egypt and Canada to the Apache Corporation, raising $7 billion to help pay for the spill.

Still, the company remains under considerable pressure. The uncertainty over its ultimate liabilities has shaved 40 percent off its share price in the last three months. Some members of Congress want to ban BP from running new offshore ventures. The Senate, meanwhile, is expected to vote on legislation this week that would hold BP “accountable,” according to Senator Harry Reid, the Democratic majority leader.

And the company still continues to lurch from one public relations embarrassment to another. Last week, BP acknowledged it posted doctored pictures of its spill operations on its corporate Web site.

Although Mr. Dudley has a short track record in the gulf, he has already won over some. For example, after Mr. Dudley met with Governor Bob Riley of Alabama a week ago, “the governor felt that Mr. Dudley was very responsive to Alabama’s concerns,” according to Todd Stacy, a spokesman for Mr. Riley.

The expected appointment of Mr. Dudley would be the first time that a foreigner served as the top executive of BP, which was once known as British Petroleum. Its board chairman, Carl-Henric Svanberg, is Swedish.

“It’s historic for them to pick an American,” said Amy Myers Jaffe, an energy expert at Rice University. “But it sends a message that merit and competency mean more than nationality.”

Julia Werdigier, Campbell Robertson, John M. Broder and Helene Cooper contributed reporting.