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BP set to name Robert Dudley, an American, as chief executive

By Steven Mufson
Washington Post Staff Writer
Tuesday, July 27, 2010; A13

For a London-based petroleum company that relies largely on oil produced in the United States and Russia, Robert Dudley might be just the ticket.

BP's board is expected to announce early Tuesday that it has picked Dudley, who grew up in Hattiesburg, Miss., and later spent eight years working in Russia, to become the company's chief executive, cutting short the turbulent tenure of British geologist Tony Hayward, who has been caught in the vortex of U.S. public anger over the Gulf of Mexico oil spill.

The choice of the even-keeled Dudley, who would become the first American to run the company formerly known as British Petroleum, would represent a fresh start for a firm that has been soiled by the massive oil spill.

"It turns a new page, and it starts to look to the future," said Daniel Yergin, chairman of IHS Cambridge Energy Research Associates. "I think Bob has both the technical competence and a broad view of the industry and where it fits into the world."

The mere prospect of Dudley becoming BP's chief executive marks a cultural shift for a corporate goliath that suffered from identity issues ever since it acquired three big U.S. oil firms -- Amoco, Arco and Sohio -- more than a decade ago. Although British BP chiefs had shuttled back and forth by plane from their St. James Square headquarters in London to their U.S. empire, the cultural gulf proved too big.

And after the April 20 drilling rig explosion killed 11 workers and set off the largest oil spill in U.S. history, Hayward struck several wrong notes with an angry American public. On Monday, Florida Attorney General Bill McCollum (R) said that throughout the spill, Hayward "has appeared disingenuous, disinterested, and often dismissive of what our state, our businesses and our residents are suffering."

In some ways, picking Dudley is like reaching back to the past to move into the future. He worked for Amoco (formerly known as Standard Oil Co. of Indiana) for nearly 20 years in the United States, Britain and Russia. When BP bought the company in 1998, Dudley, then Amoco's general manager for strategy, made the leap to BP.

His U.S. background might prove an asset both to him and the company. Forty percent of BP's shareholders live in the United States, and BP is the largest producer of oil in the United States. With Congress contemplating a ban on BP operating on federal lands, and with the Justice Department weighing criminal charges in connection with the rig blowout, Dudley's background and temperament could help BP navigate U.S. political waters and protect the company's ability to do business here.

"BP has two vulnerabilities, political and legal," said Robin West, chairman of PFC Energy, a Washington consulting firm. "The political vulnerability is that Congress wants to punish BP."

Dudley also has experience around the world. While at Amoco, he negotiated projects in the South China Sea and in Russia. At BP, he fit in well. He played a key role in politically sensitive negotiations over the construction of a pipeline in Azerbaijan. Later, he ran BP's TNK-BP joint venture in Moscow, and helped oversee improvements in safety, accounting and drilling practices in old Soviet fields. His five-year stint ended in discord with BP's Russian billionaire partners; after being denied a visa, Dudley ran operations from abroad until an accord was reached on a successor.

"He has demonstrated an ability to operate successfully under pressure," West said. "This is a guy who has really been battle-tested twice."

A source close to the Russian partners in TNK-BP said that the dispute in Russia arose because "we felt our strategies were diverging. It had nothing to do with Dudley. He's a competent manager and has the potential to be a successful CEO. We partner with institutions, not individuals. Whoever they pick is their decision."

People who know and work with Dudley say he has weathered past battles calmly. Yergin described him as "very steady -- he makes people around him calm." People who have worked with him at BP use phrases like "very level-headed." One former executive called him "the last, best hope for BP as BP."

But Dudley faces a gargantuan challenge. BP is fighting for its survival while trying, in Hayward's phrase, to "make things right" in the Gulf of Mexico.

The company is on the hook for one of the largest environmental cleanup operations in history. On Tuesday, the company releases earnings and it will unveil its best estimates of what it will need to set aside. The profits from operations are expected to top $5 billion -- but BP has spent $4 billion already to contain the oil spill, has pledged to set aside $20 billion in an escrow account, and faces unquantifiable liabilities in lawsuits from fishermen, holiday hotel owners and tourism businesses across the Gulf Coast.

Since late June, Dudley has been setting up a separate BP unit to deal with the cleanup efforts. He has cited it as a sign of BP's long-term commitment as well as a way to allow other people in the company to focus on their businesses. In doing so, he's made the rounds of Gulf Coast politicians.

"We have gotten to know Bob during his recent assignment on the Gulf and would wish him well on any new assignment," Louisiana Gov. Bobby Jindal (R) said in an e-mailed statement. "But as we've said before, it doesn't matter to us who is running the company as long as BP fulfills their duties as the Responsible Party to restore the damage caused to our ecosystem, coastal communities and industries." Jindal added that "we still have outstanding requests for BP."

Meanwhile, Hayward, who spent his entire career at BP, will step down Oct. 1 and leave the company's board at the end of the year, said a source familiar with Hayward's talks with the board. He will become one of four BP directors on the board of TNK-BP, according to the Associated Press. The TNK-BP directors meet about half a dozen times a year.

To some, the appointment looks like banishing Hayward to Siberia. But it keeps Hayward involved in an important and lucrative venture, one that could use his experience because TNK-BP's next operating chief is a young Russian oil entrepreneur still getting training. A source close to the Russian shareholders said Monday that they "would actually welcome him [Hayward] on the board."

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