Translated material
Neither two nor one and a half
Lord Browne will leave BP earlier than planned
A change of power in one of the largest private oil and gas corporations in the world, BP, will occur much earlier than expected. A series of troubles, which over the past year threw the company from second place in terms of capitalization among energy giants to fifth place and almost brought its head Lord Brown to the dock , eventually did their job. He will leave his post on July 31, although he planned to remain in it for another 1.5-2 years. Last summer, the chairman of the board of directors of BP (as well as the board of directors of Goldman Sachs International), Peter Sutherland, who led the party dissatisfied with the latest “successes” of the chief executive officer of the corporation, got John Brown to say that he would leave before the end of 2008. However, at the end of last week, after the next meeting of the board, the name of the successor was announced - he will be Tony Hayward, who now heads the exploration and production sector of the group. Mr. Sutherland, whose words are quoted in BP's official statement, especially emphasized that Lord Brown personally insisted on the official publication of the name of the future head of the company. But he, apparently, did not plan to transfer powers so soon. Council members insisted on this on the initiative of the chairman. "Having now named a new CEO, we have decided that a six-month transition period would be better for the company than an 18-month one," said Peter Sutherland.Moreover, it so happened that the adjusted timing of the big change in Verkhovna Rada now corresponds to the time of resignation from the post of Chairman of the Labor Party and, accordingly, British Prime Minister Tony Blair (the event, without an exact date, should happen in the summer). It is known that Brown and Blair are good friends both in life and in politics.
“John Brown, the greatest businessman of his generation, built BP into one of the largest energy groups in the world. His performance during his 12 years of leading the company was outstanding. His vision, intelligence, leadership and skill were a joy to behold, and what he did will be difficult to replicate,” Peter Sutherland was generous with his compliments. His outgoing opponent (who, by the way, occupies a chair on the board of directors of Goldman Sachs Group) commented on the situation succinctly: “Getting the opportunity to bring BP to the forefront of the global oil industry is a privilege for me.” The real reasons for the accelerated resignation are not mentioned in official comments.
Meanwhile, most likely, the summing up of the disappointing results of 2006 at the first board of directors of the new year became the catalyst for personnel decisions at BP. For the first time since the takeover of the American Amoco (this event took place in 1996, just 15 months after John Brown took over as chief executive officer), the company showed a decline in production, which was a consequence of the systemic failure of the group’s activities in North America. After a major oil spill last March, BP was forced to mothball production at the Prudhoe Bay oil field in Alaska. After that accident, troubles poured out like a cornucopia, most likely not without the support of helpful competitors who sensed BP’s weakness. In June, the US energy regulator accused the corporation of trying to manipulate part of the US propane market. Two months later, suspicions of secret influence on the oil and gasoline markets are added, and by the end of the year it turns out that the US Commodity Futures Trading Commission may punish BP for transactions with gasoline futures in 2002. In addition, in October, the US Chemical Safety Board published a conclusion that BP ignored the “catastrophic safety risks” that led to the explosion at a refinery in Texas (March 2005), which killed 15 people. The Board also concluded that the company's management was aware of significant safety problems, including at the group's other 34 operations around the world. It is also worth noting that Lord Browne may be personally involved in the proceedings in this case. And in the coming days, BP should present the results of its own internal investigation into this case. It cannot be ruled out that they also played a role in the final weakening of the position of the head of the company.
Last year was disastrous not so much for BP's performance as for its image as an environmentally friendly company and the reputation of Lord Browne himself. In 2000, he personally oversaw the group's rebranding to demonstrate its commitment to ecology and concern for the future of the planet. Then a green logo appeared, reminiscent of a flower and the sun, and the company name was changed from British Petroleum to the short BP. The abbreviation was proposed to be deciphered as Beyond Petroleum, which can be translated as “not only oil.”
The cascade of troubles is increasingly reminiscent of the scandal in the management of another European company, Royal Dutch Shell, three years ago. Then the head of the giant, Philip Watts, along with a number of other top managers, was caught deliberately distorting information about reserves, for which he eventually paid with his own post (though without any transition period). And just as then, the voice of dissatisfaction of BP shareholders, who quickly forgot the previous merits of Lord Brown, is increasingly heard. If we elaborate on the pompous words of Peter Sutherland, we can note the following. During Lord Brown's tenure, the company's capitalization increased 2.5 times, and four successful acquisitions were made. Three years after the takeover of Amoco for $52 billion, Atlantic Richfield was purchased for $26.8 billion; in 2000, Brown organized the takeover of Burmah Castrol ($4.7 billion), and four years ago he merged Russian assets with TNK shareholders . It is characteristic that already at the end of last year, BP, through dividends, fully recouped its investments as part of the deal to create TNK-BP and will now begin to receive “net profit” from business in Russia.
Brown's successor, who has been at BP since 1982, is unlikely to significantly change the group's strategy. He is considered to be quite loyal to the outgoing leader, and at the same time it is implied that he has developed a smoother relationship with Peter Sutherland. He simply must more energetically take on the removal of the rubble of the past year, primarily in the United States. As for Russia, he will obviously have to work in a much more aggressive environment. Although in 2003 Lord Brown received approval for the creation of a joint venture with TNK shareholders personally from Vladimir Putin, since then the vision of the oil and gas sector in the Kremlin has changed significantly. And many expect that just in the coming year, when the moratorium on the sale of their stake expires for the Russian shareholders of TNK-BP, the composition and structure of the shareholders of this company may radically change. And the recent history of Shell and the Sakhalin-2 project shows that the presence of a foreign investor and the lack of control on the part of the state corporation in the oil and gas giant in Russian conditions is not a guarantee, but a risk.
Lord Browne is expected to receive a severance package of £14 million (approximately $28 million) and a pension package worth around £20 million (US$40 million) for his 41 years of service to BP. At the same time, back in the summer, the outgoing head of the company, who will turn 59 in February, claimed that he had no intention of retiring and was simply planning to “change jobs.” But he did not divulge in what particular field he wanted to continue his career. Now that the resignation period has noticeably melted away, potential employers will begin the hunt for the vacating top manager in the very near future.