BP spill: it will take more than a US passport for Bob Dudley to rebuild BP in America

Tony Hayward was given to Churchillian quotes when leading BP's response to the Gulf of Mexico oil spill.

This morning's announcement is not the end of this crisis, it is not even the beginning of the end. But it is, perhaps, the end of the beginning.
Hayward's exit paves the way for Bob Dudley to assume ownership of BP's poison chalice. As an American he is deemed the most likely candidate to appease angry US politicians, starting with President Barack Obama himself.

Certainly as the compensation, regulatory prosecution and likely criminal proceedings get under way (with the hole now looking plugged) it will be useful to have an American leading BP.
But containing the financial spill that the company now faces probably won't be Dudley's biggest challenge. Having prudentially provided for the worst case, he'll have an army of lawyers to do that for him.
It's rebuilding BP in the US that will be his most formidable challenge and that may well be beyond any incoming chief executive, American or not.

BP is America's biggest domestic oil and gas producer. It's America's biggest oil polluter. It has most of Congress ranged against it not to mention the lobbying interests of its biggest oil rivals. Which commercial or investment partners will, in their right minds, want to be seen to be associated with BP in future? Some, but not many.
BP will not only have to pay for its transgressions in the US, but it will have to be seen to pay. Hayward going is one element, as is the $30bn or more it will pay in compensation of one sort or another. But it's quite likely that if it wants to maintain a big economic interest in the US BP will have to pay with its name and with changes to how it operates.
I'd expect the biggest issue for Dudley to resolve is exactly what model he adopts in the future for how he does business in the US – the status quo is not an option.
What might be prudent, certainly as far has his enormous upstream exploration and production assets are concerned, is to withdraw as the front line operator and instead become an investor. Handing over operational control to third parties, and possibly selling stakes to new investment partners, will push BP into the background in an "out of sight, out of mind" strategy while maintaining economic exposure, as far as possible, for the benefit of shareholders.

Damian Reece, The Telegraph 27-07-2010

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