The company said it would add an extra $1 billion to the $6 billion already earmarked over the next four years to upgrade all aspects of safety at its U.S. refineries and to repair and replace infield pipelines in Alaska.
The spending is part of a wide-ranging package of measures aimed at improving confidence in the integrity of BP’s U.S. operations following a series of incidents over the past 18 months, including last year’s explosion at the Texas City refinery, the recent oil spill in Alaska, and the investigation into propane trading activity in the U.S.
“These events in our U.S. businesses have all caused great shock within the BP Group,” BP Chief Executive Lord Browne said from London. “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 U.S. businesses are consistently operating safely, and with honesty and integrity.”
“We are, of course, continuing to cooperate to the fullest possible extent with the U.S. regulatory bodies investigating these events,” added Browne. “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.”
Browne said the company plans to appoint an advisory board to assist and advise the group’s wholly owned U.S. subsidiary, BP America Inc., and its newly appointed chairman, Robert A. Malone, in monitoring the operations of BP’s U.S. businesses with particular focus on compliance, safety, and regulatory affairs.
The measures Browne announced include a step-up in the scale and pace of spending at BP’s five U.S. refineries on maintenance, turnarounds, inspections, and staff training. Spending will now rise to $1.5 billion this year from $1.2 billion in 2005 and will jump further to an average $1.7 billion each year from 2007 to 2010.
Systems to manage process safety at the refineries will undergo a major upgrade, with some $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 U.S. Occupational, Safety & 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 process known as “pigging”--by November, six months ahead of the original schedule.
Any necessary bypass lines are being built this summer, and BP is making its own arrangements for the safe disposal of pipeline residues. The work is expected to cost some $50 million and entail the loss of around 40,000 barrels a day of production for up to a month. BP’s share of this lost production is 11,000 barrels a day.
The pipeline, which leaked in the recent oil spill, has been taken out of service and will be replaced by a new line that has already been ordered. If other transit lines are found to be faulty, they will be replaced as well.
Browne said a major review by independent external auditors had also been set in train of the BP’s compliance systems in its U.S. trading business. In the wake of allegations of market manipulation in U.S. 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 U.S. regulatory authorities, and BP said that it will urgently act upon the auditors’ recommendations.
”The steps taken today, including the appointment of a new advisory board for our U.S. subsidiary, indicate the absolute determination of the BP Group to restore confidence at every level in the conduct of our business in the U.S.,” Browne said.
”BP has some 40 percent of its assets and its staff in the United States and a U.S. investment program of around $30 billion over the next five years,” concluded Browne. “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 U.S. businesses operate to the highest standards of safety and integrity.”
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