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BP: Slow rehabilitation

Robert Peston | 09:59 UK time, Monday, 4 April 2011

For the avoidance of doubt, BP has not yet received formal permission from US regulators at the Bureau of Ocean Energy, Management, Regulation and Enforcement to resume drilling in the Gulf of Mexico.


The oil rig Deepwater Horizon on fire in the Gulf of Mexico

You would be forgiven for believing that the thumbs-up has been given, since that is what has been conveyed in newspapers and on the wires over the past 24 hours (following an initial disclosure in the Sunday Times).

Now BP would presumably not be so dim as to allow a story like this to run unless it were about to come true. And I am told that US regulators have given it an informal nod, so to speak: in July it can get back to work in the waters it polluted not so very long ago.

And that, from the point of view of BP's management, would be quite an achievement.

Certainly last summer, when BP was corporate enemy number one in the US, it seemed inconceivable that BP would so soon again be drilling wells where an explosion on the Deepwater Horizon rig killed 11 workers and set in train a despoliation of seas and coast perceived in the White House as of unprecedented seriousness.

Presumably the US authorities are persuaded that BP's review of what went wrong and how it can prevent future drilling accidents now makes it one of the world's safer oil companies.

Curiously though, an influential organisation that advises BP's shareholders seems less persuaded that the company has learned the appropriate lessons.

In an unusual move, Glass Lewis - a governance analysis and proxy voting firm that advises institutions which manage $17 trillion in assets - is advising investors to vote against the approval of BP's annual report and accounts at next week's annual meeting.

Glass Lewis says that the report and accounts contain inadequate detail on "the specific steps the company is taking to prevent a recurrence of such an enormous disaster". And it therefore urges shareholders to "voice their opposition to these deficiencies by rejecting the company's report and accounts".

Now BP would say it has taken very public steps to improve its management of risk, including the creation of a specialist safety division which will have the power and resources to intrude into every nook and cranny of the business.

But if Glass Lewis feels that BP's intent to rehabilitate itself isn't captured in the annual report and accounts, which can be seen as its main contract with its owners, that is not a trivial criticism.

And it is also pretty embarrassing for BP's board that Glass Lewis recommends that shareholders vote against the re-election of members of the Safety, Ethics & Environmental Assurance Committee, namely Bill Castell, Antony Burgmans and Cynthia Carroll.

It will be fascinating to see which, if any, of BP's bigger shareholders follow Glass Lewis's advice. But tension between BP's management and its owners at this critical juncture - when, as I mentioned, BP hasn't yet been given a formal licence to resume drilling in the Gulf and is some way from resuming business as usual in the US - is unfortunate.

Comments

  • Comment number 1.

    Are the oil companies and oil bigger than the banks, as in they cannot be allowed to fail? And after this incident (sorry maybe too small a word in this case) BP could not really let its or its contractors do the same thing again, could they?

  • Comment number 2.

    "BP has not yet received formal permission from US regulators... to resume drilling in the Gulf of Mexico"

    But they will. Because they must.

    Growth is good...

  • Comment number 3.

    If this is true it is excellent news. I strongly suspect that BP most likely is the safest and most experienced company in deep ocean exploration and drilling following last years spill in the Gulf. Can't be a bad thing at all for the company and the UK. They won't make any mistakes this time round i'll bet. Equally importantly, their sub-contractors will be more on the ball as well. Great news. Hope it's true.

  • Comment number 4.

    Even more strange is the readiness of the US authorities to give BP the nod. Strange also that Transocean are giving their bosses large bonuses for safety performance. Neither of which makes sense operationally or politically. I find it difficult to believe that the authorities in America are not going to get some flack for allowing business as usual (mark II) so soon after one of the worst disasters experienced by the states. The fact of a shareholder pressure group querying the decision should be cause for concern in both BP and Washington.

  • Comment number 5.

    Glass Lewis cannot be impartial if they also deal with other oil companies.

    On one level it would be very good for BP to have the most rigorous standards. I am however concerned that Glass Lewis and others could force lack of competitiveness on BP and then benefit from the subsequent sale or even demise of the company.

    Finance always has a strange relationship with safety:
    http://www.bbc.co.uk/news/world-us-canada-12949637

  • Comment number 6.

    Can't see the problem, after all the CEO of the company that owned, maintained and ran the rig got a huge bonus (several hundred times my lifetime income) for the exceptional safety record last year...

    Oh what the **** the rich get immeasurably 'richer' at the expense of the planet and the rest of us... eventually they'll **** us off so much they will end up on the receiving end of a revolution.

  • Comment number 7.

    Of course BP will get the thumbs up to continue drilling for oil in the Gulf. Probably the most important issue to the US government will be the lost tax revenues by not sucking up the black stuff, hey don't think the US government are any different to ours by being ethical or honest about things, they are as bad if not worse ......

  • Comment number 8.

    Good news for BP. Bad news for UK Plc.

    Following Osbourne's ill judged tax hike many oil and gas companies are looking to dump their interests in the UK N Sea and move elsewhere. BP now has the option of shifting their HQ to the USA which is of course something they've considered before and I wouldn't be at all surprised if they now decided to do just that.

  • Comment number 9.

    Well we all want to drive our cars, no? And we don't like to pay much for fuel? What's more, BP is a no-brainer for pension funds.

    We are all in this together, it seems.

  • Comment number 10.

    Looks like the Safety, Ethics & Environmental Assurance Committee is serving it's sacrificial purpose on the altar of commercial reality.

    "Let's sack the safety guy, after all he's responsible for safety....?"

    "...even though we starved him of his budget (we're all saving money now), made his workforce redundant (ditto), didn't copy him in all of the emails (saving server space), missed him from a few meetings (saved on meeting costs), ignored his protestations (does that guy ever shut up?), shredded the reports we didn't like (all of our shredding is recycled you know), recruited the guy from the mailroom (anyone can make it in this business), gave him the office farthest away from the guys in charge (making efficient use of the resources at our disposal)..."



  • Comment number 11.

    It would be appropriate for the authorities to clean up the last mess completely before allowing another potential mess to happen however unlikely that may be.

    But as we see oil is far more important than just as a fuel there are fortunes to be had in the trading of the commodity and the traders dont give a damn about the consequences they just need more commodity, their lobbying power will ensure drilling resumes as soon as possible.

  • Comment number 12.

    Robert,

    I am haunted by the fact that the banks ( like the pied piper) led us over the cliff. OK, we were seduced - it was too easy - we should have known. What is emerging now that is different is your clear commentary and analysis of bank's behaviour and contextual events. Last time, I blamed the banks, the government ( you know - the days of boom and bust are over person)and the media for effectively not shouting 'Fire', letting it happen and leaving us (not them) with the awful bill, which I suspect may survive my children. How awful is that. This time, you at least are delivering clear commentary which we can all understand. Thank you. Keep it up, please!

  • Comment number 13.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 14.

    Glass Lewis are hardly imparial - in fact many see them as a lobbying group. So it is not surprising that they are trying to muddy the waters in this matter.

    Also I am not sure that BP were solely responsible for the pollution as you imply in your blogg - the contractors to BP have a heavy responsiblity to bear.

    Let's hope that BP can get back to drilling in the Gulf of Mexico very soon- it is a fine UK business.

  • Comment number 15.

    Whats really interesting about this blog and the others that preceded it on investment banks, pay at RBS etc, is the apparent willingness of some people to accept the frankly ridiculous rennumeration we now see in all these organisations. We see statements like'if this is what is needed to return this organisation to profit, good say I (when referring to the number of individuals on £1 million plus pounds per year)' There is no mention of course that individuals were paid the same amount when 'ruinining' the organisation. This really is a triumph of propoganda, if we say enough times 'we are worth it' or 'this is what the market requires', then the great British public (or some of it), seem willing to accept it. The fact that others could do a much better job for much less, is not even debated. Then there is the matter of taxation, the reality is that many of these overpaid bastions of society pay little or no tax, no wonder Cammeron has to argue 'we are all in it together', because of course we are not, and somebody has to pay the tax.

  • Comment number 16.

    Even without depletion of existing reservoirs oil is going to get scarce.
    Unrest throughout the middle east will guarantee troubled supplies.
    The US needs oil. Loads of it and reliably.
    Heck we all need it. That fact seems to have passed Osborne by however.
    Once Saudi becomes restless due to internal difficulties then the scramble for oil will turn into a veritable stampede.
    Those countries without a good energy supply will simply fail.
    Obama knows this. That is why we are keeping options open for Libya.
    Obama will soon be talking to the Cubans.
    Oil oil oil.
    And Osborne? Not a clue. He'll scrap the country all for political dogma. What a loser.

  • Comment number 17.

    @ 16. At 17:11pm on 4th Apr 2011, prudeboy wrote:

    > The US needs oil. Loads of it and reliably.

    Coal, too!

  • Comment number 18.

    #17 Jacques Cartier
    "Coal, too!"

    You are right. Although given the choice I reckon reckon there would be more votes to had for oil.

    A bad winter, with power cuts, would have nukes back on the agenda replacing coal.
    But gas will always be guzzled.

  • Comment number 19.

    Robert:
    I think that the "rehab" process of B.P. will be a very long term job; because of the "damaged" that occurred in the Gulf Coast in the United States in 2010....

    -DENNIS JUNIOR-

  • Comment number 20.

    Here's an interesting story - it's not only banks which give bonuses for failure:

    'Transocean Ltd., the owner of the Deepwater Horizon oil rig that exploded off the Gulf of Mexico last year, has given its top executives bonuses for achieving the "best year in safety performance in our company's history'' '

    http://english.aljazeera.net/news/americas/2011/04/20114395819864760.html

  • Comment number 21.

    For me comments 1 and 2 say it all. Of course this is BIG business, it doesn't get any bigger. These (banks and oil) are supranational institutions. Paradoxically, they are both regulated industries and like the pharma companies, which are also BIG business and suranational institutions and regulated, they are beyond national law. They exist in that hyperspace beyond the reach of genuinely punitive and progressive legislation.

 

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