Roland Gribben: where the oil spill stands in BP's 110-year history

One hundred days represents a short timespan in the history of a company able to trace its roots back almost 110 years.

But for BP, or British Petroleum as it is known in the White House, the three months since the Deepwater Horizon disaster with the loss of 11 lives and many more livelihoods, the period has been the most traumatic and catastrophic since William Knox d'Arcy laid the foundations of the business back in 1901.
For the coastline populations of the states bordering the Gulf of Mexico, the oil washing on to what should have been holiday beaches and inching up inland creeks represents economic and ecological agony, for the oil industry an ugly and unacceptable stain, for President Obama a political minefield, and for BP a total failure of all it holds dear – its management, its engineering, its reputation and credibility. Truly Beyond Petroleum.

It is unprecedented for an international company of its size, capabilities and proud pedigree to find itself on the verge of disintegration through a single event or mistake. The mistakes and consequences do not come much bigger than Deepwater Horizon. Has BP the management and ability to recover? History shows it has thrown up some outstanding leaders but has struggled with structure and chain of command in an industry approaching its twilight years and where crisis and politics are inter-linked.
The political dimension hung heavily over BP and its management for much of the last century. Nationalised by Churchill to safeguard First World War oil supplies, BP effectively became an extension of British foreign policy and its managers part-time diplomats and an occasional berth for Foreign Office refugees.
The early BP culture encouraged a civil service mentality that served the business comfortably although the relationship with government was not without its tensions or differences, particularly over nationalisation in Iran. Management structure was loose, relaxed and gentlemanly and the route to the top smacked of the Edwardian "bag carrier". Potential chairmen or senior executives were identified at an early stage, working alongside and travelling with the top brass of the day.
Politics and the state's shareholding kept BP out of North America for almost 70 years but did not prevent the group developing a powerful engineering presence and geologists capable of interpreting seismic data better than the competition. The strengths and weaknesses of the two big British oil players during the 1950s and 1960s was neatly encapsulated thus: "BP can find oil and can't sell it; Shell can't find oil but can sell it." Shell at one stage was so perplexed by its inability to find oil that some of its geologists ended up on the psychologist's couch.
BP needed stronger, tougher and more experienced managers rather than psychologists as it moved further afield to grow the business but struggled to develop or find them. The North American entry, courtesy of Sohio and Prudhoe Bay in Alaska, added an important leg to the business and an organisational mess. Duplication and slowness to integrate reflected weakness at the centre.
There was no shortage of attempts to reorganise and modernise the operation, cut costs or give youth a chance. The trouble was they were a frequent feature. The explanation? "We rediscover bad habits too quickly."
Diversification produced new opportunities and challenges. BP was not alone among oil companies in finding difficulty in embracing multi-discipline management but a distinctively collegiate approach – a chairman and managing directors with divisional responsibilities – and an executive board below represented bureaucracy and muddled thinking at its worst.
Enter the new generation. Sir Peter Walters (chairman and chief executive 1981-90) created a stronger succession pipeline and struggled to provide lift-off for a business depending on two pipelines – one in Alaska and the other in the North Sea – for a living. Sir Robert Horton (chairman 1990-1992), an all-action man who cut costs, numbers and businesses but failed to carry the board with him. Lord Simon (chief executive 1992-95, chairman 1995-97), with a background in marketing masked his exploration shortcomings by giving John Browne the freedom of Britannic House (BP headquarters) and the chief executive post in 1995.
The Browne years were dramatic and adventurous in terms of building BP into a business with global clout. The downside in the shape of defective kit and under-investment manifested itself later in the unfortunate catalogue of refinery accidents. A hands-on Lord Browne could not be persuaded to see the merits of providing the US business with a greater degree of autonomy, an issue now high on the agenda of the "New BP".
Retirements and a gradual erosion of executive support for the Browne style of management did little to help stability. Lord Browne admits he stayed too long. Tony Hayward thought he would have until 2012 to change culture, style, management and priorities and strengthen a depleted engineering cadre. Deepwater Horizon has given him less than three.
What next? BP will experience root and branch change, will become smaller and deeply cautious in the process and the next chief executive will have the "oil job from ell".
Roland Gribben is a former Business Editor of The Daily Telegraph who has written about BP for a number of decades.

Roland Gribben, The Telegraph 27-07-2010

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