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BP exploits past triumph over disaster to camouflage new one welling up

In an access of self-congratulation, BP’s current press advertising campaign trumpets the oil company’s success quelling one of the world’s worst natural disasters  – caused by, er, itself (and, in fairness, a few commercial collaborators such as Transocean and Halliburton). An irony in itself, you might say. But, as will be seen, not the only one.

The ads, created by Ogilvy, feature an image of the Macondo oil site in the Gulf of Mexico taken on September 28th last year, showing a crystal-blue ocean lapping around an oil rig. Below it is the strapline: “One year later. Our Commitment continues.” And, just to give the flavour, here is some of the body copy: “From the beginning, BP has taken responsibility for the clean-up. Much progress has been made and our commitment to the Gulf remains unchanged.” The campaign marks the anniversary of a massive explosion on April 20th last year, whose after-effects devastated the wild life, fishing and tourist industry in the Gulf. It should be added that the disaster nearly brought BP, one of the world’s largest companies, to its knees, and cost its chief executive, Tony Hayward, his job.

BP, under new management headed by Bob Dudley, is now breathing a huge sigh of corporate relief. Predictions that it would be broken up, that its share price had undergone irreparable damage, that it would be a blighted brand shunned by consumers, or even that it would be excluded from further drilling operations in one of the world’s most prolific oil fields, have all proved wide of the mark. Meanwhile, almost all the beaches are back in business in the Gulf. So a triumph of sorts .

But what’s this? Dudley, the squeaky-clean new CEO, is in trouble already. An American with extensive experience of the Russian oil market, Dudley’s big strategic idea is to call in the Old World to redress BP’s damaged balance in the New. Specifically, he has crafted a smart but high-risk deal with Russia’s state-owned oil group Rosneft, which would give BP a free hand in exploiting some of the world’s richest oil reserves, languishing under the Arctic shelf. Rosneft does not have the expertise to do this on its own, and the deal – involving a massive $16bn share-swap between BP and Rosneft – would put BP in the enviable position of being the only oil major able to tap into these reserves, while also lessening the company’s dependence on the USA as an upstream (oil exploration) market.

At the time it was announced a few months ago, the Rosneft deal was greeted with much hoopla in the investment community, which had the desired elevating effect on BP’s share price. Now, however, the deal has reached an impasse and Dudley’s reputation is potentially oil-tarred. The politics are complicated but, essentially, BP’s partners in its existing Russian joint-venture, TNK-BP, have – apparently unexpectedly but so far successfully – injuncted the deal. Time is running out: the deadline is April 15th. Either the deal fails, in which case BP will receive another massive blow-back to its reputation. Or BP comes up with a huge bung (said to be $2bn) so that the green-mailers go away. Option B is of course preferable, but still leaves Dudley, BP, his chums at Rosneft and in the Kremlin looking like a bunch of chumps who have been outwitted by a few greedy oligarchs.

Either way, a bit of tactical diversion aimed at BP’s investment community – which is still largely London-based – seems highly desirable while things are sorted out. And what better manner of doing it than to remind investors, via the Sunday press, the dailies, The Spectator, New Scientist and the Economist, of BP’s earlier triumph? Or rather, triumph over a self-manufactured disaster.

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