Task ahead for BP's new boss is more than just financial

HOWEVER much BP may seek to reassure investors over rushed asset sales, new leadership and its plans for the future, the Gulf of Mexico oil spill disaster is a stunning blow to Britain's biggest company and to its reputation in oil exploration and production worldwide.

Beneath the horrendous figures yesterday of financial loss, this is first and foremost a human tragedy. Eleven workers were killed in the explosion on the Deepwater Horizon drilling rig. Estimates of the extent of the oil spill quickly rose from negligible, to 1,000 barrels a day, to 5,000. Later estimates raised this figure to 40,000 barrels a day.

The oil spill has caused enormous environmental damage. Yesterday, the enormity of the damage done to BP - so far - became clearer: a record $17 billion (11bn) loss in the three months to June, the largest quarterly deficit ever recorded by a British company. All told, the group's provisioning for the disaster stands at $32bn. Shareholders, who include most of the UK's private and public-sector pension funds, have seen the value of their investment tumble by almost 40 per cent, and have been further hit by the extended cancellation of dividend payments - a further blow to retirement savings. There is also a potential huge loss to governments and taxpayers: last year, BP paid tax of 8.4bn, and the year before 12.6bn, though if North Sea operations are taxed separately, the UK Exchequer may not suffer as badly as its US counterpart.

Chief executive Tony Hayward is standing down by mutual consent with a severance package including a year's pay and benefits estimated to be worth more than 1 million and entitlement at age 55 to draw income of 600,000 from a pension pot reckoned at about 11m. Understandably, that will incense the many victims of the disaster on the Gulf of Mexico coast. He may be entitled to a generous pension, given his lifetime employment with the company, but he was also part of a cost-cutting corporate culture at BP that has now come under searching questions over the impact this may have had on group health and safety. The horrendously expensive lesson that BP has now learnt is that what may have seemed a low-risk strategy for driving earnings through cost savings actually involved taking the biggest risk of all.

Both BP and the oil exploration and development industry generally must be profoundly changed by this disaster. Appraisal work and exploration wells will be approached far more cautiously in future and emergency procedures made a feature of the granting of oil licences. Indeed, there is already a critical appraisal of deepwater oil exploration generally off the coast of America.

As for BP, has it grown too big for one man, or even one board, to manage? Hayward's successor, Bob Dudley, now in charge of BP's clean-up operation, faces a massive job of thorough-going culture change. He will be judged not only on the speed of asset sales, cash generation and dividend restoration, but on the change in mindset and practice at a corporate colossus that in its very field of expertise has been shaken to the core.