Hayward's Troubleshooting Skills Face Stiff Test at BP

LONDON Sep 25, 2007 (From The Wall Street Journal via Dow Jones Newswires)

BP PLC's (BP) new chief executive is moving to sharpen up his company's embattled safety and operational performance but he's not out of the woods yet.

Tony Hayward, whose admission that the company's operational performance in the third quarter would be "dreadful" and saw BP's shares slide 3% Tuesday, faces fresh questions about the company's ability to improve its track record.

Following the death of three contractors in the U.K.'s North Sea and an Alaska pipeline fire, "there must (still) be questions about safety," said Jop Groeneweg, a well-known safety researcher at Leiden University in the Netherlands.

Since he arrived at the top in May, the soft-spoken, low-key Hayward has resolved thorny negotiations in Russia and Libya while devising ways to simplify the company's complex corporate structure, including the hiring of consultancy Bain & Co. Inc.

Former CEO John Browne, who resigned in May after lying to a London court, was heavily criticized for a series of operational mishaps at the company's U.S. operations. Those included a Texas City, Texas, refinery blast where 15 workers died in 2005 and a partial shutdown at an Alaska pipeline after heavy corrosion was discovered in 2006.

But safety and operational challenges, big and small, have continued to crop up since Hayward arrived in May - not just in the U.S. but in many other corners of the BP empire.

Sunday, the deaths of three crew members on a U.K. North Sea rescue vessel contracted by BP PLC (BP) is one of the safety challenges BP continues to face.

The three fatalities took place on a vessel owned by Vroon Offshore Services Ltd. while it was on standby for possible emergencies on a drilling rig in the BP-operated Amethyst gas field.

Groeneweg said: "Had it not been for BP, the boat would not have been there."

BP referred comments to Vroon but said Tuesday that it is "offering assistance for the investigation." The local police said Tuesday that the cause of the deaths remains unknown. Vroon says the incident is being investigated as a maritime incident not an oil or gas issue.

A BP spokesman said that the company is striving to get its shipowners' contractors to be consistent with his company's standards. Without commenting on whether Vroon's standards were consistent with BP's, the BP spokesman said his company has reoffered help regarding its safety measures. On land, the U.K. Health and Safety Executive, a public watchdog, asked BP to rectify safety regulations breaches at its oil depot in Grangemouth, Scotland, in June and at a Saltend chemicals facility in May.

At Grangemouth, a notice for improvement was served in June "because a suitable and sufficient assessment of human factors and human performance hasn't been undertaken, which may impact on the major accident risks at the establishment," states the HSE.

A fire at another U.K. depot, co-owned by Chevron Corp. (CVX) and Total SA (TOT) in 2005, was a reminder of risks associated with such facilities.

The BP spokesman said: "Work on both improvement notices (which deadline was August) has been carried out."

In the U.S. last month, a small fire at a turbine that helps process oil at the Prudhoe Bay oilfield in Alaska prompted BP to shut the turbine and inspect a similar one.

In addition, the company warned in July that the restoration of full capacity at its 410,000-barrel-a-day Whiting, Ind., refinery would not come before the first half of 2008. The refinery has been running at a reduced rate since March after fire damaged a hydrotreater.

Some U.S. oil experts remain skeptical of Hayward's ability to clean up after Browne.

Matthew Simmons, president of U.S. oil consultancy Simmons & Co International, says Hayward also carries responsibilities for the company's woes, having been head of exploration and production when the Alaska issues surfaced.

He wonders if Hayward is "moving fast smartly" or if he is doing a "Hail Mary," - reference to a speculative, long forward pass in American football usually late on in a game and made in desperation for a score that has only a very small chance of success.

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