BP CEO lays out new corporate structure

BP will undergo a major corporate restructuring to reduce high overhead costs and improve its performance to match its rivals within the next 2-3 years, the company's CEO Tony Hayward has pledged.

Uchenna Izundu
International Editor

LONDON, Oct. 16 -- BP PLC will undergo a major corporate restructuring to reduce high overhead costs and improve its performance to match its rivals within the next 2-3 years, the company's Chief Executive Tony Hayward has pledged.

The gas, power, and renewables business segment will be absorbed into the two other divisions of the company—namely exploration and production and refining and marketing. "The two segments will be made up of a series of strategic performance units," BP said, adding that the segments will become the company's main operating entities.

BP also will establish an alternative energy division to manage its low-carbon business and future growth options outside oil and gas.

The decisions are the conclusion of a 6-month review of the group's operational performance, which found "overlaps and excessive organizational complexity." Hayward is keen to regain investor confidence following poor revenues compared with its rivals, the fatal refinery explosion in Texas, delayed production in the Gulf of Mexico, and major pipeline leaks. "We expect the revenue gap to narrow as major new production comes on stream in the fourth quarter and refinery throughputs rise at Texas City and Whiting over the coming months," he said.

Hayward has promised to focus on safety, people, and performance to turn the company around (OGJ Online, July 25, 2007). "Our problem is not about the strategy itself but about our execution of it," said Hayward. "BP's performance has materially lagged our peer group in the last 3 years. It has been poor because we are not consistent and our organization has grown too complex. At the root of all this is a need to change our behaviors."

The company expects to cut as many as four layers of management in its revamp of some sections and has introduced greater standardization of process across the company to avoid duplication and waste. Hayward admitted that there could be layoffs, but stressed that front-line operations would not be affected. BP may sell small-scale assets to streamline its portfolio and does not anticipate major disposals. It remains unclear how many jobs will be lost and the costs of the shake-up.

Hayward wants to ensure that the "right skills in the right places" are deployed so that staff can exercise professional judgment without "unnecessary interference."

Contact Uchenna Izundu at uchennai@pennwell.com.

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