x Abu Dhabi, UAESunday 21 January 2018

BP shake-up may set safety precedent for oil majors

The corporate shake-up that BP is to implement under its incoming chief executive could set a powerful precedent for oil producers around the world.

The corporate shake-up that BP is to implement under its incoming chief executive could set a powerful precedent for oil producers around the world. Following BP's disastrous spill in the Gulf of Mexico, oil corporations, as well as their managers and directors, will risk serious legal consequences if they fail to adopt the highest international safety standards or ignore local health, safety and environment (HSE) regulations.

Even among the oil majors, not all producers are yet up to the task. "There is a dangerous disconnect between international HSE standards and local law," said David Leckie, a partner in the international oil company Clyde & Co, based in London. "No matter how high your international standards, they are not good enough unless they are somehow tied to local law." On Wednesday, as Mr Leckie briefed a group of oil and gas industry professionals in Abu Dhabi, BP announced it would create a new safety division with "sweeping powers to oversee and audit the company's operations around the world".

BP's move follows the Macondo oil well blowout in the Gulf of Mexico in April, in which 11 workers on the Deepwater Horizon oil platform were killed. An estimated four to five million barrels of oil spilled into the Gulf in the worst US maritime environmental disaster. BP's new "safety and operational risk function" would embed expert staff in the company's operating units. It would have "authority to intervene in all aspects of BP's technical activities".

Bob Dudley, who becomes the chief executive of BP today, said the group would review in detail how it manages third-party contractors and motivates business performance. He said BP would split its upstream oil and gas business into exploration, development and production divisions. On Wednesday, he fired Andy Inglis, BP's head of exploration and production at the time of the spill. Mr Inglis had worked closely with Tony Hayward, who announced in July that he would resign as chief executive. At one time, Mr Inglis had been tipped to become the next BP chief.

"These are the first and most urgent steps in a programme I am putting in place to rebuild trust in BP," Mr Dudley said. "That trust is vital to the restoration of shareholder value which has been so adversely affected by recent events. "The changes are in areas where I believe we most clearly need to act, with safety and risk management our most urgent priority." Mr Dudley's first actions as chief executive are in line with Mr Leckie's recommendations, including implementing consistent international HSE procedures and adapting them to the requirements of local regulatory regimes.

Mr Leckie also advises oil producers to design emergency response plans and training programmes that can be applied consistently around the world. "The oil industry is a major target for prosecutors," he observed. "The industry is subject to close regulation and it is easy to breach the rules." In the UK, prosecutors increasingly argue that incidents involving a defendant company's operations in other countries constituted evidence in any breach of British regulations, Mr Leckie said.

Under UK criminal law, companies can be convicted of corporate manslaughter and corporate homicide, exposing them to unlimited liability. On Tuesday, Sheldon Whitehouse, a US Democratic senator, introduced legislation to make all companies involved in an oil spill open to lawsuits from those whose health or livelihoods had been harmed. The law would void the terms of commercial contracts limiting parties' liability following a spill.

Certain companies involved in the Deepwater Horizon disaster were "trying to evade responsibility by arguing that current law only allows BP to be held accountable for damages cause by the spill", Mr Whitehouse said, referring to the rig owner Transocean and the contractor Halliburton. "This legislation will make clear that, going forward, liability extends to all responsible parties." The cost of the spill so far to BP is US$9.5 billion (Dh34.89bn).