This week in mergers...and rumors

BP safety failings 'go right to top'
By Dan Roberts and Sylvia Pfeifer
Last Updated: 11:53pm GMT 13/01/2007



An independent investigation into BP's Texan refinery disaster has concluded that there were serious structural deficiencies in the way the company managed safety stretching right up to its London headquarters.


Lord Browne will stand down as BP CEO in July


The conclusions will be published on Tuesday in a damning report from a panel led by James Baker, the former US secretary of state, that casts new light on the pressures building up against Lord Browne, the chief executive, before his surprise retirement announcement on Friday.

According to sources who have seen copies of the 250-page report, it focuses on failings in "process safety management" that undermine previous claims that BP's problems in North America have all been isolated incidents.

"The report finds the problems go all the way to the top and to talk about what happened in Texas City you have to talk about what happened in London," said one. "There is no level of the company that is exempt from responsibility."

Another added: "It includes London because that is where the head office is, but that doesn't mean problems were found everywhere – this is about whether safety issues are managed in a consistent way."

advertisementBP has also signed a sweeping new safety agreement with American unions that could see union-approved "chief operators" sitting alongside BP refinery managers as independent pairs of eyes. The agreement reached in principle late last week could add significant extra bureaucracy to BP's operations, but unions are keen to extend the safety agreement worldwide.

BP's board is due to meet tomorrow to consider its response to the Baker report, which it first saw last week. The company has already made changes since the accident and is expected to accept the report's recommendations but withhold comment on its broader findings pending further legal action in America.

The company is also still awaiting the final report from the US Chemical Safety & Hazard Investigation Board (CSB). In October last year the CSB concluded that budget cuts caused a progressive deterioration in safety.

" BP implemented a 25 per cent cut on fixed costs from 1998 to 2000 that adversely impacted maintenance expen-ditures and infrastructure at the refinery," said Carolyn Merritt, the chairman of CSB at the time.

"Every successful corporation must contain its costs. But at an ageing facility like Texas City, it is not responsible to cut budgets related to safety and maintenance without thoroughly examining the impact on the risk of a catastrophic accident."

Even supporters of the oil giant have in recent months expressed concern that the accidents are signs of a more systemic problem. Several experienced industry watchers believe BP cut investment in areas such as Alaska during the late 1990s when crude prices were low and oil companies around the world were trying to control costs.

"The worrying thing for me is that there have been too many incidents," said a former BP executive. "The problems pre-date the Amoco acquisition. They go all the way back to Alaska. How do you know when you've done too much cost-cutting?" he asked.

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