Saturday Profile: BP chief has the bit between his teeth

Published on Friday 4 September 2009 21:50

ONE OF Tony Hayward's best festive seasons was on an oilrig off the coast of Aberdeen.

It was 4am on Christmas morning and the young BP rig geologist, fresh from completing his PhD at Edinburgh University, was awake when the drill bit hit subsea rock.

The Miller field was his discovery. It boded well. Twenty-five years later, Hayward became the chief executive of BP, following the slightly earlier than expected departure of his predecessor, Lord Browne of Madingley.

This week brought another good moment for Hayward, as he unveiled a "giant" find in the Gulf of Mexico. It was the biggest for BP since the nearby Kaskida field, which was found in 2006, and the first since Hayward took the helm.

BP thinks the field has as much potential as the Forties – BP's great find on the UK continental shelf nearly 40 years ago – except the Tiber field is deeper in the ground and further offshore than most, presenting a host of technical difficulties getting the oil out.

However, news of the find cheered investors, whose initial excitement added 4bn to the value of BP on Wednesday.

But the trick to succeeding in the oil business is playing a long game, and the value of the estimated reserves in Tiber – three billion barrels – won't come into play at least until 2020.

Even so, this week's move marks a high point for Hayward, who, five months into the job, had warned staff the oil giant's performance was "dreadful". The leaked memo caused a sensation in the City and promptly wiped 3.5bn off the company's value.

But the slip allowed Hayward to prove the difference between his management style and that of Lord Browne.

Although Browne was often referred to as the "Sun King" for his 13 years at the helm of BP, during which he lifted it to become one of the world's big three, alongside Shell and Exxon, the company had been troubled. An explosion at the Texas City refinery, which killed 15 people, and pipeline leaks in Alaska marred his tenure.

And although Hayward was close to the disasters – he was head of production and exploration and a main board director for three years before he took over – he immediately set about talking about the need to listen to staff. He also criticised BP's "more for less" safety culture.

Hayward has, in the past two years, streamlined BP's operations. He has cut 5,000 jobs and cut costs by 20 per cent across the group's global operations, although he admits the group has "not really begun" in "getting the supply-chain costs back to where they need to bed".

This year hasn't only been filled with triumphs, though, and one of Hayward's down points would have been having to say goodbye to one of his champions, Sir Tom McKillop. He fell on his sword before BP's AGM in April this year to prevent the disaster of his chairmanship of RBS leaching over to BP, where he had been a non-executive director since 2004.

McKillop was heavily involved in selecting Browne's successor, and although Hayward left most of the talking to his incumbent chairman, Peter Sutherland, he admitted he would miss McKillop. Sutherland, too, is leaving at the end of this year.

Browne had noticed Hayward's talents early, choosing him as a "Turtle" – a specially designated and typically idiosyncratic fast-track management programme for BP high-flyers.

It meant that Hayward spent years working closely with Browne at the highest levels.

But the difference between the two men is notable. Where Browne liked his El Rey del Mundo cigars and premier cru Burgundy – not to mention living a jet-set lifestyle schmoozing with royalty and heads of state – Hayward is a little more down to earth.

Fadel Gheit, a senior energy analyst at Oppenheimer in New York, says: " He has a great sense of humour, especially after a few beers."

Hayward was in Edinburgh in March as part of his regular series of meetings with investors. Edinburgh is an important base for BP, where 5 per cent of its investors – including Standard Life Investments, Aegon and SWIP – are based.

His style is different from that of his predecessor and more inclusive, says Jason Kenney, head of pan-European oil and gas equity research for ING.

"You take Tony around, and if somebody comes into the meeting he is very happy to see them," says Kenney. "If you have a group lunch he is happy to talk to everyone there.

"He is very open and honest and credible. Yet he knows his nuts and bolts. I'm not saying Lord Browne didn't, but he was only interested in the larger shareholders. There was a lot of 'if you're not all this you don't get in' sort of thing."

But Hayward is also astutely managing the long-term future of Britain's oil major.

The long game in oil is also about relationships. The Gulf of Mexico Tiber field means BP will work with Brazil's national oil company, Petrobras, which owns a smaller share of that field. Analyst say the collaboration "could bode well for further deepwater oil/gas collaboration elsewhere in time".

And although there was scepticism about the wisdom, and even the commercial viability, of taking on a massive contract in Iraq, Hayward used his latest conference call with analysts to talk up the possibilities of BP's joint venture there with Chinese oil company CNPC.

Iraq is clearly another long-term play.

One of the good reasons for doing the Iraq deal, Hayward explained, was "to make available to ourselves the Chinese supply chain".

"And the relationship with CNPC provides us with the opportunity to access in a very unique way the Chinese supply chain," he said.

More good news for BP, too, was the release of the Lockerbie bomber, Abdelbaset Ali Mohmed al-Megrahi to Libya.

Although BP denies any involvement with the shadowy negotiations surrounding the release of Scotland's most notorious prisoner, it will be among the first companies to benefit from the opening of trade with Libya.

BP signed a $900 million exploration and production agreement with the Libyan government in 2007.

"Politics and oil go hand in hand, don't they?" says Kenney of ING.

"I doubt BP were particularly bothered about the one man in a Scottish jail. They were more bothered about Libya opening up and becoming an open place to do business, with a stable investment climate where they can get access to resources."

A LIFE WITH BP

TONY Hayward, 57, was born in Surrey. He joined BP from school, working in London, Aberdeen, Glasgow, France and China. In 1982 he completed a PhD in geology at Edinburgh University.

In 1992 he moved to Colombia as exploration manager and in 1995, he became president of the BP group in Venezuela.

In 1997, he returned to the UK as director of exploration and in 1999 became a vice-president. He was made executive vice-president in 2002, becoming chief executive officer for exploration and production later that year. He succeeded Lord Browne as chief executive in 2007.

He is married with two children and lives in Surrey.