The shadowy legacy of BP's former 'Sun King'
ROME -- ereguly@globeandmail.com
At BP, where he was CEO from 1995 to 2007, he was known as the "Sun King." He was said to be obsessed with status, counted Tony Blair among his friends and ruled without opposition as he turned the second-tier British oil company into a potential Exxon beater. He was considered arrogant and clever. His underlings would refer to him as the "small but perfect" boss - a gentle swipe at his compact size - or, less kindly, "one half genius, the other half missing."
Today, people who know John Browne (now Baron Browne of Madingley), or used to work for him, call him exceedingly lucky. As his successor Tony Hayward struggles to save BP and his own career from destruction, Mr. Browne's career has been rehabilitated. Shortly after Britain's brutal austerity package was delivered in the June 22 budget, he was appointed the new efficiency czar by the new coalition government. His job: finding the £6.2-billion ($9.9-billion) in spending cuts promised by Chancellor of the Exchequer George Osborne.
Some believe Mr. Browne's new career is well deserved, for he was regarded as an enthusiastic cost cutter during his 12-year reign at BP and should be able to trim public spending with similar alacrity. Others think it's a joke, because the salami-slicing approach to costs might be at the core of BP's woes. While the results of the various investigations into what went wrong at BP's Macondo well in the Gulf of Mexico may not be known for some time, the company had been accused for years of using cost cutting to ill effect. Indeed, BP has an abysmal safety record.
In retrospect, the timing of Mr. Browne's exodus couldn't have been better. He resigned in May, 2007, a year and a half ahead of his intended departure date, after he lied in a British court about his homosexual relationship with a young Canadian, Jeff Chevalier. It also cost him his job as a Goldman Sachs director.
In came Mr. Hayward, a humble geologist who was the cultural opposite of Mr. Browne and his regal style. Mr. Hayward vowed to make BP less accident prone. A year before he got the top job, he said that BP had used "a management style that has made a virtue of doing more for less."
Too bad he didn't move fast enough. On April 20, an explosion wrecked the Deepwater Horizon drilling rig, triggering the biggest oil blowout in American history. Almost three months later, the well is still out of control and turning large swaths of the Gulf into a toxic soup. As the costs mount - BP effectively faces unlimited damages liability - Mr. Hayward's career seems doomed and BP itself may be sold, broken up or forced in whole or in part to file for bankruptcy. So much for the Exxon beater.
Mr. Browne's mission was to make BP more of a "commercial" company, acquaintances and former employees have said, and less of an engineering-driven business (as the evidently more safety conscious Exxon became after the 1989 Exxon Valdez disaster). Out went some staff engineers; in came contractors. It worked, in the sense that BP's growth accelerated rapidly, taking the share price up with it. The high-value paper allowed BP to make big acquisitions, including Amoco, which thrust the company into oil's super league. By the time Mr. Browne left, BP was the biggest oil producer in the U.S., thanks to its huge presence in the Gulf, and third largest in the world.
But look what happened along the way. In 2000, BP took a felony conviction for its failure to report quickly the illegal dumping by a contractor of hazardous waste at its Endicott field in Alaska. BP admitted criminal damage for a pipeline spill in 2006 on Alaska's North Slope. Some 200,000 gallons of oil leaked from the corroded pipe. Scott West, who was in charge of the Environmental Protection Agency's criminal investigation division at the time of the leak, told The Anchorage Daily News last month that it appeared to him that BP had decided not to invest in aging infrastructure in declining North Slope fields. "We kept hearing a phrase called 'operate to failure,' " he said.
BP took a second felony conviction for the 2005 explosion at its Texas City refinery that killed 15 subcontractors, injured another 170 and pretty much sealed BP's reputation in the U. S. as a defective operator. The three events came under Mr. Browne's watch. BP has always maintained it makes safety the priority.
The official investigations into BP's Macondo disaster in the Gulf could determine that BP was the victim of an accident that could not be avoided. But it could also find negligence or gross negligence. Note that BP is doing everything possible to make nice with White House, including putting $20-billion (U.S.) into a damages fund and suspending its dividend. A company that believes it did nothing wrong probably would not have been so malleable.
Mr. Hayward may be a goner. The rumours say he will be replaced once Macondo is capped for good. There is little doubt he will come under more questioning in Washington about the cause of the blowout. Meanwhile, Mr. Browne's image is being repaired by the British government. Perhaps the U.S. Congress should balance it off, insisting that he too face questioning about BP's safety record, and whether the cost cutting he nurtured had anything to do with its downfall.
