The aftermath of Prudhoe Bay

The Prudhoe Bay oil spill couldn’t have come at a worse time for BP, which was already reeling from a series of disasters and scandals that have plagued the company over the past 18 months, including last year’s explosion at the Texas City refinery and the investigation into propane trading activity in the US.

Now it is hoping to boost its tarnished image by swiftly announcing a wide-ranging package of measures aimed at improving the operational integrity and monitoring of its US businesses, pledging a further US$1 billion to the US$6 billion already earmarked over the next four years to upgrade all aspects of safety at its US refineries and to repair and replace infield pipelines in Alaska.

Speaking in London, BP’s Chief Executive, Lord Browne, said: “These events in our US businesses have all caused great shock within the BP Group. They have prompted us to look very critically at what we can learn from ourselves and others, and at what more we can do in certain key areas to assure ourselves and the outside world that our US businesses are consistently operating safely, and with honesty and integrity.

“We are, of course, continuing to co-operate to the fullest possible extent with the US regulatory bodies investigating these events. But we do not believe we can simply await the outcome of those investigations. In addition to the significant steps we have already taken we have decided we must do more now.”

While repair work continues at Prudhoe Bay, Browne said it is intended to appoint an advisory board to assist and advise the Group’s wholly-owned US subsidiary, BP America Inc. and its newly-appointed chairman, Robert Malone, in monitoring the operations of BP’s US businesses, with a particular focus on compliance, safety and regulatory affairs.

The measures include a step-up in the scale and pace of spending at BP’s five US refineries on maintenance, turnarounds, inspections and staff training. Spend will now rise to US$1.5 billion this year from US$1.2 billion in 2005 and will jump further to an average US$1.7 billion each year from 2007 to 2010.

Systems to manage process safety at the refineries will undergo a major upgrade, with some US$200 million earmarked to pay for 300 external experts who will conduct comprehensive audits, and re-designs where necessary, of all safety process systems. The new systems are targeted to be installed and working by the end of 2007 – a year ahead of the original schedule.

Browne said the input of the US Occupational, Safety and Health Administration (OSHA) would be sought throughout the process and that the outcome would mirror or exceed OSHA’s requirements. BP also pledged more rapid action to restore the integrity of its infield pipelines in Alaska. With corrosion monitoring already upgraded, it now plans to remove pipeline residues through a pigging process by November – six months ahead of the original schedule.

Browne said a major review by independent external auditors had also been set in train of the BP’s compliance systems in its US trading business. In the wake of allegations of market manipulation in US propane trading, the auditors will examine the design of the trading organization, delegations of authority, standards and guidelines, resources and the effectiveness of control and compliance. The results of the review will be shared with relevant US regulatory authorities and the auditors’ recommendations will be urgently acted upon by BP.

“The steps taken, including the appointment of a new advisory board for our US subsidiary, indicate the absolute determination of the BP Group to restore confidence at every level in the conduct of our business in the US,” Browne said.

“BP has some 40 per cent of its assets and its staff in the United States and a US investment program of around US$30 billion over the next five years. We are the largest indigenous producer of oil and gas combined. It is of vital importance to BP and to Americans who depend significantly on us for secure energy supplies that our US businesses operate to the highest standards of safety and integrity.”