Ever since Queen Elizabeth II described 1992 as an “annus horribilis” the Latin phrase has become the vernacular appellation for any individual or organisation subject to 12 months of chronic misfortune. This year, the most worthy recipient of the dubious honour was oil giant BP. To many the name now stands for ‘big problems’, usurping the meaning from its green-espousing marketing mantra, ‘Beyond Petroleum’. Today, news that BP’s boss, Lord Browne, is to step down in July – six months earlier than initially announced – is more grist to the mill for a media that has chronicled a year of the company leaping from one self-induced crisis to another. SwelledHead considers how Lord Browne’s successor, Tony Hayward (currently head of exploration and production) can turn the corner with its public profile.
One thing after another
Before moving onto the positive, it’s worth a recap of just why 2006 was so awful for one of Britain’s largest and best known companies. The litany of disaster stems from the devastating explosion at the Texas City oil refinery in March 2005 that killed 15 and injured 180. It was the worst US industrial accident in more than a decade. The site had previous safety problems. In March 2004, it was evacuated after an explosion that cost the company $63,000 in fines. In September the same year, two workers died and another was seriously injured by scalding water that escaped from a high-pressure pipe.
In 2006, accusations of behind-the-scenes mismanagement of critical environmental and safety matters, and underhand business practice, was revealed one event at a time. In March there was the 1m litre (267,000 gallon) oil spill at Prudhoe Bay in Alaska, which threatened 8% of US supply and was enough to raise world oil prices. In June the US energy regulator filed a lawsuit accusing BP of attempting to manipulate the American propane market. The next month there was a rather public row between Lord Browne and chairman Peter Sutherland over the Browne’s departure date, while operationally the company closed 12 wells at Prudhoe Bay following the earlier leaks. To add to the criminal investigation faced by BP for Texas City, in August it emerged that the company was also being probed over possible manipulation of crude oil and unleaded petrol/gasoline markets. And further wells were closed in Prudhoe Bay.
In September, the start of production from Thunder Horse, BP’s giant offshore development in the Gulf of Mexico, was put back two years following the discovery of failure in key components of the system. In October, murmurings about a laissez-faire attitude to safety gained credence following the US Chemical Safety Board’s interim report into the Texas City refinery explosion. It accused BP of ignoring “catastrophic safety risks” and of knowing about “significant safety problems” at 34 other facilities around the world. CSB chairwoman, Carolyn Merritt, blamed the explosion on “aging infrastructure, overzealous cost-cutting, inadequate design and risk blindness.”
November saw the release of a consultant's report about the Texas City refinery, written a few months before the disaster, which said he had never seen a site “where the notion 'I could die today' was so real for so very many people” and that there was an “exceptional degree of fear of catastrophic incidents” at the plant. BP’s head of exploration and production, Tony Hayward, confirmed what many suspected when he said “[BP] has lived too long in the world of making do and patching this quarter for the next quarter.” His criticism of the company, which were put on its intranet system by staff, noted that BP’s leadership does not listen enough to what “the bottom” says and that safety needed more work.
Proponents of BP say that the incidents and events, while lamentable, are isolated and should not be linked as evidence of systemic failure within the organisation. A reader of SwelledHead commented that our post in January made the same mistake as other media by citing incorrect evidence due to misunderstandings of the Alaskan pipeline system. Maybe so, though our point was less about the detail of how BP’s troubles occurred and more about how mismanagement was damaging to the firm’s brand. Indeed, the City is unconvinced that BP’s problems are exceptional. Its shares have fallen by 20% since April of last year.
Turning the corner
So, what can Tony Hayward do to remove the tarnish of a full year of troubling headlines?
Clearly BP needs to get its house in order, but the key to restoring faith in the brand (and gaining back lost stock market value) is in how it communicates that effort to its stakeholders and the wider public.
- BP needs to openly address its failings and explain with clarity and a fair degree of candour, what is being done at every level within the organisation.
- It must be willing to meet with and fully engage the media, including some of its sharpest critics, so that journalists feel they are being properly informed and not being fed ‘spin’. This will help to end the ‘bandwagoning’ that keeps bad headlines flowing.
- As well as working with the media, BP should take control of its own reporting. It should set up a dedicated website, ‘BP Better Practice’, that details the company’s plans for its own redemption and charts the positive work as it takes place. This site should include an executive blog, with key management figures reporting regularly on how lessons are being learned and problems rectified.
- The admission by Hayward himself that employees are not being listened is an issue that needs to be tackled head on. The Better Practice website should show how safety and environmental related investment tracks advice given by those on the front line. This will help to restore confidence and morale among the company’s staff worldwide.
Telling the story of how BP is turning back to success should not be an end in itself. It creates the opportunity to resell the green agenda. Much was invested of the re-branding exercise, ‘Beyond Petroleum’, with its bright green logo. The company has put billions into technologies such as wind power, solar power and bioscience research. BP is also pioneering a technology whereby carbon dioxide emitted from power stations can be pumped into underground wells. This eye on the future is seen by both the public and the City as wholly good news and the change to bring the positive to bear when working through to a difficult period change adds potential to the end result.
Perhaps BP will take on some of these initiatives, perhaps not, but SwelledHead hopes that, however the company pulls itself out of the quagmire, by the end of the year it can be justifiably seen as being Beyond Problems.
