Wednesday, June 23, 2010

BP Executive Prepares to Take Over Spill Response

Faced with the continuing American furor over its gaffe-prone British chief executive, Tony Hayward, BP is putting a former Mississippi resident in charge of handling the Gulf of Mexico oil spill and its aftermath, Clifford Krauss and Andrew E. Kramer report in The New York Times.

Robert Dudley, who takes charge of BP’s spill response on Wednesday, has plenty of experience dealing with a hostile government, unhappy partners and angry citizens.

The former head of BP’s joint venture in Russia, TNK-BP, he was expelled from that country in 2008 after a nasty feud with the authorities and BP’s business partners. In the end, BP was forced to turn over management control of the venture to the Russians, though it remains highly profitable for both sides.

“I became a lightning rod between BP and the Russian owners,” said Mr. Dudley in an interview on Tuesday. “You learn in that kind of fast-paced, unpredictable environment to stay calm, get organized quickly and make sure you can communicate across an organization so everyone knows the direction and remains committed.”

Whether Mr. Dudley, a soft-spoken man with a wisp of a Southern accent, can repair BP’s ruptured relationships on the Gulf Coast and in Washington remains to be seen.

Once a candidate to be the London-based company’s chief executive, Mr. Dudley, 54, has spent just over a year as a board member and as BP’s “foreign secretary,” dispatched to deal with sticky situations in India, China and, now, the United States.

He will oversee BP’s cleanup efforts in the gulf, as well as its legal response and the handover of the claims process to the escrow fund’s administrator, Kenneth Feinberg. If Mr. Dudley succeeds in this assignment, analysts say, he could very well end up replacing the embattled Mr. Hayward.

“If Dudley handles the crisis in the gulf in an effective manner, it would put him directly in line for the top spot at BP, just as he was several years ago,” said Chris Ruppel, managing director of capital markets at Execution Noble, an international investment bank.

Mr. Hayward has certainly upset many Americans, from President Obama to the families of the 11 men killed in the Deepwater Horizon oil platform accident on April 20.

He initially minimized the impact of the disaster, then publicly wished he could “get my life back.” Most recently, he took a day off to watch a yacht race in Britain even as Louisiana shrimpers were kept off the water by a fishing ban because of the oil spill.

BP’s original plan, announced three weeks ago, was to have Mr. Dudley take over management of the crisis in August, once the pressure in the leaking well was eased by relief wells. But last week, after a long meeting between top BP officials and Mr. Obama and then a tense day of combative Congressional testimony by Mr. Hayward, the company decided to speed up the transition.

Fadel Gheit, a senior oil analyst at Oppenheimer & Company, said Mr. Dudley will have an easier time dealing with the American public.

“He’s not only a good ol’ boy, but he’s from Mississippi and he doesn’t have a British accent,” Mr. Gheit said. “The media will take it a lot easier on him. He will fit in the landscape better than Tony Hayward.”

Mr. Dudley, who prefers to go by Bob, declined to criticize Mr. Hayward and said he would still report to him. He said he had not studied the well accident.

“The anger of the nation is vented at BP, and there is justification for the anger in that there is a leak that continues today,” he acknowledged in the interview, which was held in a colorless room in BP’s Houston offices.

Mr. Dudley said that he empathized with Gulf Coast residents. Though he was born in Queens, he grew up in Hattiesburg, Miss., and spent summers in Biloxi with his family and their sheepdog.

“I know what it’s like to jump off and swim off a boat in the gulf,” he said. “I know what crabbing, shrimping and fishing is all about.”

Mr. Dudley joined BP in 1999 after the company bought Amoco, an American oil company, and he oversaw exploration and production in a variety of countries before heading BP’s Russian joint venture.

He received mixed reviews for his difficult role in Russia, which would probably have challenged even the most skillful diplomat because of an energy business culture there rampant with corruption and kickbacks.

Under his leadership, from 2003 to 2008, TNK-BP increased production by more than 25 percent, and delivered among the highest financial returns in the Russian oil patch.

Mr. Dudley tried to emphasize safety in a country where it had long been a low priority, beginning his town-hall style meetings with managers every six weeks or so with a review of operational safety. Once, he upbraided managers because a refinery employee had died from inhaling fumes while cleaning a tank.

But he was far less successful in merging the Russian and British cultures that infused the joint operation. Indeed, he was accused of contributing to an elitist attitude among the British staff and ignoring the sensibilities of the Russians.

“There was an attitude of ‘Get out of the way. We’ll show you how to do it,’ ” said one former manager at the venture, who requested anonymity because the situation remained delicate and he was still doing business in Russia. In one memorable incident, the British team held a barbecue and failed to invite any of their Russian partners.

Eventually, Mr. Dudley became a central figure in the drawn-out fight between BP and the nation’s oligarchs, who were backed by senior figures in the Kremlin. The Putin government clearly wanted Russians, rather than BP employees, in charge of the west Siberian fields.

One sticking point was BP’s opposition to TNK-BP’s paying a high dividend. BP thought the money would better be reinvested in exploration. BP’s stock would also benefit from booking additional reserves, even if they were not pumped. The oligarchs wanted to generate cash for other projects.

The dispute ended with a flurry of regulatory problems, apparently orchestrated by the oligarchs. Mr. Dudley’s visa was revoked and he was interrogated by Russia’s police. He tried to run the company for four months from outside Russia at a location he still declined to reveal, but finally BP agreed to turn over management control to the Russians.

Peter B. Necarsulmer, director of PBN, a consultancy that advised BP in Russia during the conflict, said that Mr. Dudley had handled himself well then.

“Wherever there’s a storm around, he’s an eye, where people can think calmly and analyze calmly and come to conclusions,” Mr. Necarsulmer said. “Even the oligarchs had a grudging respect for him.”

But one of BP’s Russian partners, Mikhail Fridman, had a different view. In a 2008 op-ed piece in The Financial Times, he wrote, “BP has refused to engage meaningfully with any of the proposals we have made in recent years. Rather than talk to us, it has chosen to misrepresent our objectives and the nature of the dispute between us.”

Mr. Dudley, an engineer by training who has worked in the oil business for 30 years, pledged that he would “speak how I feel and not dodge questions.”

“I know I will be speaking into a gale about this,” he said, “but I think it is important for people to know we are turning ourselves inside out to meet our obligations.”

Clifford Krauss reported from Houston, and Andrew E. Kramer from Moscow.

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