BP boss sets date to step down

BP boss Lord Browne ended intense speculation over his future today and said he will leave the oil giant at the end of 2008.

Lord Browne said he will retire as chief executive on New Year’s Eve that year and dismissed rumours of a rift with chairman Peter Sutherland over the timing of his departure.

It had been suggested that Lord Browne wanted to stay beyond 2008 and break BP policy of retirement at 60 – apparently putting him at loggerheads with Mr Sutherland.

But Lord Browne, who is 60 in February 2008, said: “I will leave BP at the end of 2008. Let me add that, even if I were asked to stay, I would decline.”

It came as BP banked record quarterly profits between April and June of US$6.12bn (€4.84bn) – up 23% on the same period last year and ahead of expectations in the City.

Oil analysts said replacing Lord Browne will be very difficult for BP.

Bruce Evers, of Investec Securities, said: “Lord Browne is going to be an exceptionally hard act to follow.

“He is without question the leading oil man of his generation and whoever follows him will have some very big shoes to fill.

“When he took over BP, it was not in the greatest of health but he has turned it into a truly global energy group second only to Exxon Mobil.”

Lord Browne, who took over as chief executive of BP in 1995, said he was “astonished and rather shocked” by the speculation over his future and said there was “no rift” between him and Mr Sutherland, who enjoyed “a very long-standing relationship based on mutual respect”.

He added: “My decision to go from BP is not based on age. At the end of 2008 I will have been chief executive for over 13 years and that is quite a long time.

“It is time to have a great successor.”

Lord Browne said he will not stay on in any sort of consultancy role at BP but said he wanted to carry on work elsewhere.

He added that he had put forward “more than three” names of possible successors but said the ultimate decision will be made by the board.

Names already linked with the job have included Tony Hayward, head of exploration and production, Iain Conn, head of safety and environment, John Manzoni, who is head of refining and marketing, and Robert Dudley, who is chief executive of Russian joint venture TNK-BP.

The huge rise in the second quarter sent profits for the first six months of the year up 9% to 11.38bn (€9bn).

It represented profits of £1.4m (€2.05m) an hour and came as high oil prices and strong refining margins more than made up for a drop in output.

The average price of Brent crude soared to $69.53 a barrel in the three months to June 30, compared with $61.79 in the first quarter and $51.63 a year ago.

Lord Browne said he expected oil prices to stay high because of tensions in the Middle East, parts of Latin America and Nigeria.

The high oil price has driven petrol prices to record highs, with motorists now paying around £5 (€7.32) more to fill their tanks than they were at the beginning of the year.

But Lord Browne said much of the price of petrol at the pumps was made up of tax.

“Before taxes, UK petrol prices are the lowest in Europe,” he said. “It is a very competitive market.”

He also said it was important that BP made strong profits because more than £1 in every £6 invested in UK pensions is accounted for by BP.

The high price of oil offset a 2% fall in production in the first six months of the year to 4.03 million barrels of oil a day.

Production has continued to suffer from hurricane damage to BP operations in the Gulf of Mexico, where the London-based firm said there will be further delays to its key Thunder Horse platform after workers discovered leaks. The company now expects production to start in early 2007 instead of the second half of this year.

In a separate announcement today, BP said it is to invest another one billion US dollars in addition to the six billion US dollars already allocated over the next four years to upgrade safety at its US refineries and to repair and replace infield pipelines in Alaska.

This comes following a number of incidents over the past 18 months, including an explosion last year at the Texas City refinery.

The company is also facing a criminal investigation into a massive oil spill in Alaska in which 270,000 gallons of crude leaked into Prudhoe Bay.

And earlier this month it emerged that BP had suspended three traders at the centre of an alleged propane price-fixing scandal.

Regulators in the US have filed a lawsuit against the company over claims that it bought up large amounts of propane in February 2004 and withheld it from the market to drive prices higher.

Lord Browne said: “These events in our US businesses have all caused great shock within the BP group.

“They have prompted us to look very critically at what we can learn from ourselves and others, and at what we can do in certain key areas to assure ourselves and the outside world that our US businesses are consistently operating safely and with honesty and integrity.

“We are, of course, continuing to co-operate to the fullest possible extent with the US regulatory bodies investigating these events.”

Lord Browne said an advisory board is to be appointed to advise the group’s US subsidiary, BP America, and its newly-appointed chairman, Robert Malone, which will focus on compliance, safety and regulation.