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After spill, BP turns to American as CEO

Near the blown-out well in the Gulf of Mexico, work continues on the primary relief well on Monday.

Associated Press

Near the blown-out well in the Gulf of Mexico, work continues on the primary relief well on Monday.

LONDON — Robert Dudley, who is expected to be appointed the chief executive of BP, faces a long road to restore confidence in the embattled company — particularly in the United States, the biggest part of BP's business.

Dudley, an American who has been with BP since it bought Amoco in 1998, faces myriad challenges: dealing with the costs and legal consequences of the spill in the Gulf of Mexico, repairing damaged relations with federal and state authorities, bolstering morale among BP employees and, perhaps critically, winning back investors. His job can be summed up simply as ensuring that BP survives its latest crisis and finds a way to move beyond it.

"I can't think of any new chief executive of an oil company stepping into a more complicated situation," said Daniel Yergin, the chairman of IHS Cambridge Energy Research Associates. "BP is going to be in a rebuilding mode, and the aftermath of the spill will go on for a long time."

Dudley, 54 and whose ascension is expected to be announced today, will succeed Tony Hayward, who is resigning from the job he has held since 2007. In recent weeks, Hayward, in conjunction with top executives and directors, had concluded he could no longer effectively lead the company after he came under criticism in the United States for his handling of the Deepwater Horizon disaster in the gulf.

Few seemed surprised that BP, which was once partly owned by the British government and is based in London, would pick an American leader for the first time in its history. It was a recognition that addressing the effects of the spill would be the executive's top job for the foreseeable future. It also signaled the importance of BP's operations in the United States, especially its deepwater wells in the gulf, to the company's overall business.

BP is the largest oil and gas producer in the United States, and its global exploration and production business is run from Houston. Americans account for about 40 percent of its employees and shareholders.

BP's operations in the United States grew out of its initial partnership with Sohio, or Standard Oil of Ohio, when it discovered oil in Alaska in the 1960s. BP eventually acquired Sohio in 1987 and greatly expanded its American presence after it bought Amoco in 1998 and Atlantic Richfield, also known as Arco, in 2000.

BP operates Alaska's biggest oil field, Prudhoe Bay, and is the largest shareholder in Alyeska, the company that operates the 800-mile Trans Alaska Pipeline System. It owns five refineries in the United States, and it is the biggest producer of oil and natural gas in the gulf, where it accounts for about a third of production.

"It's quite depressing to think that you need an American chief executive to resurrect BP in the U.S., but the sentiment there has just gone too far in one direction," said Will Riley, a fund manager at Guinness Asset Management in London, which owns BP shares. "The announcement of the sale of non-U.S. assets showed that they seem to believe that they have a future in the United States."

However, that future is imperiled by a flurry of possible legislation and regulation after the April 20 explosion of the Deepwater Horizon.

In the last three months, Congress has held more than 50 hearings and examined more than 80 bills related to the spill.

Several measures have been approved at the committee level, including provisions that would bar operators with serious safety problems from obtaining new offshore leases, a measure seen as singling out BP. The full Senate is due to vote this week on a slimmed-down energy bill that would increase regulatory oversight of offshore drilling and abolish the current $75 million cap on a company's liability for an oil spill.

It's unclear what new restrictions might become law, but the pressure is on to do something.

"If Congress wants to make sure bad actors don't continue to get leases, then it is important it passes legislation to ensure that," said Marilyn Heiman, director of the Offshore Energy Reform Project at the Pew Environment Group.

Dudley will also have to deal with numerous federal investigations into BP's responsibility in the explosion of the drilling rig, which killed 11 people.

There are half a dozen official inquiries, including a blue-ribbon commission appointed by the president, a joint investigation by the Coast Guard and the agency regulating offshore drilling and several congressional investigations. In addition, legions of plaintiff lawyers have swarmed the Gulf Coast filing lawsuits against BP.

Meanwhile, BP is also preparing to unveil its second-quarter financial results today, including how much it will set aside to cover the costs of the spill. Analysts estimate that the final bill for BP could be $30 billion to $60 billion.

Shareholders welcomed the impending change in management Monday, a sign that perhaps they, too, considered Hayward to be damaged goods. BP's shares rose 4.9 percent on Monday, closing at $38.65.

Some investors said the departure of Hayward would do little to solve the company's immediate problems: shutting the gulf well permanently and limiting the related liabilities. No oil has been gushing into the gulf since BP installed a cap, but the company is still drilling a relief well to entomb the doomed well, a fix that is still weeks away.

Hayward's departure was seen as inevitable when he stepped back from the spotlight last month after a series of embarrassing public missteps. BP appointed Dudley, who grew up in Mississippi, to deal with its spill response operations.

Dudley, who was born in Queens, N.Y., grew up in Hattiesburg, about 80 miles north of the Gulf Coast, and he spent summers in Gulfport and Biloxi.

Hayward, who is negotiating his severance package, was reportedly offered a seat on the board of TNK-BP, the company's joint venture in Russia, which Dudley once ran.

"We want someone who's an American, who understands Americans and can speak in a way that understands and identifies with the people here," said U.S. Rep. Cliff Stearns, R-Ocala, who sparred with Hayward during a congressional hearing. "I doubt he would ever say, 'I want my life back' in the midst of all this."

'Static kill' on well could start next week

Retired Adm. Thad Allen, the Obama administration's point man on the spill, said the so-called static kill — in which mud and cement are pumped into the top of the well — should start on Monday. Because the well is now capped, that effort will be more controlled than a previous failed effort, a "top kill" in which mud was shot into the still-spewing well.

A relief well is nearly complete for the final stage, a "bottom kill" in which mud and cement are pumped in from deep underground. Allen said that work could begin Aug. 7 and could take days or weeks, depending on how well the static kill works.

Delays are possible, though. Tropical storm forecasts last week forced crews to suspend their work about 50 miles off the Louisiana coast for several days. Allen says he'll order an evacuation again if a similar storm forms.

After spill, BP turns to American as CEO 07/26/10 [Last modified: Monday, July 26, 2010 11:30pm]
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