BP charts new course
11 Oct 2007
After a recent series of catastrophic misadventures, not least at Texas City and Prudhoe Bay, BP has unveiled a major restructuring plan to improve its performance by simplifying its structure and operations. The goal, it stated, is to ensure "that resour
London - After a recent series of catastrophic misadventures, not least at Texas City and Prudhoe Bay, BP has unveiled a plan to improve its performance by simplifying its structure and operations. The stated goal is to ensure "that resources are increasingly shifted to the front line with operating managers freed from corporate bureaucracy and the burden of unnecessary overheads."
Under the, now, ongoing plan, BP will comprise only two business segments, Exploration & Production and Refining & Marketing. The two segments will be made up of a series of strategic performance units, which will become BP's main operating entities, with clearly-defined remits and business targets.
The current third segment, Gas, Power & Renewables, would be incorporated mainly into the other two, while a separate division, Alternative Energy, will handle BP's low carbon business and future growth options outside oil and gas.
While the rejig will yield medium-cost reductions, the main target is revenue growth from operational efficiencies over the longer term, said BP chief executive Tony Hayward in an "worldwide message to staff" on 11 Oct. The move follows a six-month review of its operational performance which identified wide-ranging duplication, overlap and undue organisational complexity.
Corporate infrastructure will be rigorously reviewed with some previously centralised functions slimmed down and redeployed into the business segments, said Hayward. In parts of BP up to four layers of management will be shed. Greater standardisation of process, including safety, has already been introduced and will be applied consistently across the group, he added.
Citing 'three priorities of safety, people and performance," Hayward claimed BP was making good progress on safety. The focus on people, he said, would ensure it deployed the 'right skills in the right places' and allowed staff to exercise professional judgement without 'unnecessary interference'.
"It is clear that BP's overall strategy remains robust. We have great positions in many of the major hydrocarbon basins of the world as well as in the markets of key economies and we are preparing for the longer term by building a new, low-carbon energy business, continuerd Hayward.
"Our problem is not about the strategy itself but about our execution of it. BP's performance has materially lagged our peer group in the last three years. It has been poor because we are not consistent and our organisation has grown too complex. At the root of all this is a need to change our behaviours."
Citing 'three priorities of safety, people and performance," Hayward claimed BP was making good progress on safety. The focus on people, he said, would ensure it deployed the 'right skills in the right places' and allowed staff to exercise professional judgement without 'unnecessary interference'.
"It is clear that BP's overall strategy remains robust. We have great positions in many of the major hydrocarbon basins of the world as well as in the markets of key economies and we are preparing for the longer term by building a new, low-carbon energy business, continuerd Hayward.
"Our problem is not about the strategy itself but about our execution of it. BP's performance has materially lagged our peer group in the last three years. It has been poor because we are not consistent and our organisation has grown too complex. At the root of all this is a need to change our behaviours."
Acordign to Hayward, the competitive shortfall mainly reflected impaired US refining capacity and delays to new production in the Gulf of Mexico as well as BP's higher cost base relative to its rivals. "We expect the revenue gap to narrow as major new production comes on stream in the fourth quarter and refinery throughputs rise at Texas City and Whiting over the coming months," he said.
"What we are doing represents a fundamental shift in how BP works," the BP leader concluded. "Managers will be listening more acutely, particularly to front-line staff. We will make sure individuals are fully accountable for things they control. We will respect professionalism and excellence as key to the success of our businesses - something we have not always done. Continuous improvement is what will drive performance, as opposed to short-term, unsustainable initiatives."
"What we are doing represents a fundamental shift in how BP works," the BP leader concluded. "Managers will be listening more acutely, particularly to front-line staff. We will make sure individuals are fully accountable for things they control. We will respect professionalism and excellence as key to the success of our businesses - something we have not always done. Continuous improvement is what will drive performance, as opposed to short-term, unsustainable initiatives."
