As bailiffs raided one of its Moscow offices on Wednesday, it was hard to
avoid the sinking feeling that it may once again be on the wrong side of the
authorities there.
A day after BP was elbowed aside by ExxonMobil as the preferred Arctic
exploration partner for Rosneft, the omens do not look good. The raid may be
a temporary setback. The real worry is the extent to which its Russia woes
reveal a growing gulf between BP and its peers.
Upstream expertise
Contrary to perceptions, BP has not been standing still operationally since
April 2010, when the Deepwater Horizon disaster began. It has won final
approval for two huge new ventures – the $7bn purchase of Devon Energy’s
oilfields in Brazil, and the $7.2bn Indian gas deal with Reliance Industries
– and sealed valuable smaller projects.
These are the types of venture that leverage BP’s upstream expertise, which
remains second to none.
Yet a share price drifting along at under 400p suggests that investors are not
convinced that they amount to a strategy. That is the biggest problem for
BP’s two key leaders, chief executive Bob Dudley and chairman Carl-Henric
Svanberg. The two oversold the Rosneft alliance, which was more grandiose
and less commercially solid than they claimed.
Time is running out
Add the financial and legal straitjacket in which BP operates after the Gulf
of Mexico accident and the underperformance against its peers looks
justified. The company also faces the same structural challenges as the
wider industry, including a slowing global economy and higher upstream
costs.
Messrs Dudley and Svanberg need to prove that they can recapture BP’s lost
value. Investors deserve reassurance that they can make the difficult
decisions required to do so - up to and including separation of BP’s
upstream and downstream operations.
As the Exxon/Rosneft deal shows, time is running out. For all that it is
hemmed in by its immediate past, Messrs Dudley and Svanberg must not allow
BP to be defined by its mistakes.
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