Global Insight Perspective | |
Significance | BP's U.S. Refineries Independent Safety Review Panel report led by James Baker has finally been published. |
Implications | The report is scathing of BP's failure to protect its workers at its U.S. refineries. |
Outlook | Lord Browne, who is leaving the company in the summer, will need to launch a new multi-billion-dollar safety programme, to be continued under his successor Tony Hayward. |
BP Failed on Process Safety Procedures
The dust has now settled on the report compiled by BP's U.S. Refineries Independent Safety Review Panel. The U.K. supermajor's reputation has taken a major hit after the panel’s report found that the company had not established effective or reliable ways to track “process safety” procedures across its five U.S. refineries (see World-United States: 17 January 2006: BP Promises to Implement Safety Recommendations in U.S. Refineries). “Process safety” in a refinery involves the prevention of leaks, spills, corrosions, and equipment malfunction.
Led by former U.S. Secretary of State James Baker, the report was prompted by the Texas City refinery blast in March 2005, which ultimately killed 15 and left 170 injured (see United States: 24 March 2005: Explosion at BP's Texas City Refinery Kills 14, Injures Further 70). The report accuses CEO Lord John Browne and senior executives of having "a corporate blind spot relating to process safety", but Baker said that the panel "did not find any deliberate or conscious efforts on BP's part to short-circuit safety". In the 30 years before the fatal explosion in Texas City there had been 23 fatal accidents; the refinery had previously been owned and operated by Amoco, which BP acquired in 1998.
Baker stated that there were "material deficiencies" at all five of BP's U.S. refineries and that the process of implanting the necessary changes will take years. The report said that "BP executive management apparently believed they were appropriately addressing process safety issues and risks, and it took the tragedy of Texas City to wake BP up to the fact that it was not adequately measuring, tracking, and managing process safety performance."
Recommendations from the James Baker-Led BP U.S. Refineries Independent Safety Review Panel
1: The board of directors of BP, BP's executive management (including its group chief executive), and other members of BP's corporate management must provide effective leadership on process safety. Those individuals must demonstrate their commitment to process safety by articulating a clear message on its importance and matching that message both with the policies they adopt and the actions they take.
2: BP should establish and implement an integrated and comprehensive process safety management system that systematically and continuously identifies, reduces, and manages process safety risks at its U.S. refineries.
3: BP should develop and implement a system to ensure that its executive management, its refining line management above the refinery level, and all U.S. refining personnel, including managers, supervisors, workers, and contractors, possess an appropriate level of process safety knowledge and expertise.
4: BP should involve the relevant stakeholders to develop a positive, trusting, and open process safety culture within each U.S. refinery.
5: BP should clearly define expectations and strengthen accountability for process safety performance at all levels in executive management and in the refining managerial and supervisory reporting line.
6: BP should provide more effective and better coordinated process safety support for the U.S. refining line organisation.
7: BP should develop, implement, maintain, and periodically update an integrated set of leading and lagging performance indicators for more effectively monitoring the process safety performance of the U.S. refineries. In addition, BP should work with the U.S. Chemical Safety and Hazard Investigation Board and with industry, labour organisations, other governmental agencies, and other organisations to develop a consensus set of leading and lagging indicators for process safety performance for use in the refining and chemical processing industries.
8: BP should establish and implement an effective system to audit process safety performance at its U.S. refineries.
9: BP's Board should monitor the implementation of the recommendations of the panel (including the related commentary) and the ongoing process safety performance of BP's U.S. refineries. The board should, for a period of at least five calendar years, engage an independent monitor to report annually to the board on BP's progress in implementing the panel's recommendations (including the related commentary). The board should also report publicly on the progress of such implementation and on BP's ongoing process safety performance.
10: BP should use the lessons learned from the Texas City tragedy and from the panel's report to transform the company into a recognised industry leader in process safety management.
Outlook and Implications
The Baker panel report was published only days after BP announced that Browne would leave the company at the end of July, 17 months earlier than expected (see World: 15 January 2007: BP Chief Executive Lord Browne to Step Down in July). Following the release of the damaging report it is now clear that Browne's early exit is not entirely voluntary. Tony Hayward the current head of exploration and production will take over from Lord Browne as BP's chief executive. For BP it appears that a six-month handover may work to the company's benefit, rather than the 18-month one that was planned previously. Despite Browne's impressive career at BP, of which the acquisitions of Amoco and Arco mark the high points, the last 18 months has been a difficult and challenging period, dominated by several severe lapses in safety operations; BP will enter a new era under Hayward.
It appears that things will get worse for BP’s reputation before they get better since the company is also under investigation by U.S. regulators for allegedly manipulating the U.S. propane market (see United States: 29 June 2006: U.S. Regulator Accuses BP of Manipulating Propane Prices). BP's multitude of problems with its pipelines at Alaska’s Prudhoe Bay, the largest oilfield in the United States, are also under investigation (see United States: 21 July 2006: BP Ordered to Drain Alaskan Pipeline Ahead of Corrosion Tests). Last year, the company said that pipeline tests revealed "unexpectedly severe corrosion" and led to a production shut-in (see World: 7 August 2006: BP Shuts Production at Prudhoe Bay), for which the company had to apologise.
Browne will need to launch a new multi-billion-dollar safety programme, which will continue under Hayward's watch, and BP will need to install an effective way to track process safety procedures.