The company’s future had to be resolved in Russia, one of the world’s largest oil and gas producers.
Likewise its position in America, still the biggest consumer of energy.
Two-and-a-half years later, Dudley has ticked off the first by swapping the company’s stake in its TNK-BP joint-venture for a slice of Russian producer Rosneft and $12bn (£7.8bn). But the man from Mississippi has not solved BP’s problem in his own backyard, where the company is still grappling with the fallout from the Gulf of Mexico oil spill in April 2010.
For shareholders, there has been progress in reducing the uncertainty caused by a disaster that took 11 lives and further damaged BP’s already tarnished reputation in America. Last spring, the company reached an $8.5bn deal with thousands of businesses along the Gulf coast. Then, three months ago, BP struck a $4.5bn criminal settlement with the US government over the spill.
The billions of pounds the company has rightly spent on cleaning up the mess has also gone some way to repairing its reputation in the Gulf.
But the next five days presents Dudley and the rest of the BP board with their thorniest decision yet on how to put this episode in the company’s history behind it. On Monday, a long-delayed trial into who is to blame for the spill is scheduled to start in New Orleans.
In a worst-case scenario, the trial could drag into 2014 and leave BP facing a $20bn fine. In any scenario, a trial will see the darkest chapter in the company’s history recounted in unremitting public glare in a part of America that remains critical to its ambitions .
While there is still a chance of a last-minute settlement, BP’s dismissal on Tuesday of the US government’s claims as “excessive” come as something of a surprise. The company vigorously contests the allegation from the Department of Justice that it was grossly negligent and also takes issue with the number of barrels of oil that spilled into the Gulf. Its willingness to go to court will also be strengthened because under US maritime law this will be a trial with a judge, but without a jury.
BP is right to go to court if, based on the evidence, it believes it can convince a judge it was not grossly negligent and was not the only party at fault in the spill. Winning that argument could be the difference between a $3bn fine and a $20bn one. But it is a high-risk strategy and one dreaded by shareholders, who are desperate for BP to put the episode behind it and start comprehensively laying out its future plans.
Dudley has got one tick on that to-do list. Don’t be surprised if the second eventually comes via another settlement whether in the next five days or once the trial has begun.
= Banks’ archaic IT systems are a liability =
The legacy of his technophobia is an institution that is thought to have one of the worst IT systems in the banking industry and that in an industry beset by technology problems.
Like the citizens of many developing countries who are accustomed to seeing the power cut out on a regular basis, Britons are starting to become used to the periodic breakdowns in the computer systems of our nation’s largest banks.
And while much is made rightly and wrongly of the industry’s problems, whether cultural or otherwise, it is the sector’s IT issues which go to the heart of the problem these businesses face.
On Tuesday, Lloyds Banking Group (LSE: LLOY.L - news) was fined £4.3m by the Financial Services Authority over its handling of payment protection insurance claims, including “inadvertently” losing the details of 24,589 cases. The fine surfaced just months after the bank was hit by a £4.2m penalty for failing to keep accurate mortgage records on 250,000 of its customers. That episode included the revelation that Lloyds’ Bank of Scotland subsidiary had no checks in place to “identify errors” in its database.
For decades now, some banks have serially underinvested in their IT. While the current management teams of the major high street banks recognise the problem, dealing with it is another matter.
As RBS discovered last year, when what was meant to be a routine software update backfired, taking down some its systems for several weeks, pushing changes through is far from straightforward.
For the likes of RBS and Lloyds, the unavoidable fact is that they are likely to be forced to spend hundreds of millions of pounds more doing work that should have been done a long time ago.
Not having top spec IT is not just an inconvenience, it is a genuine liability. And an issue closely bound up with the banks’ efforts to regain public trust.
= Diplomatic Bailey welcomed by City =
Andrew Bailey, the Bank of England’s deputy governor for prudential regulation from April, has warned darkly about the “powerful banking lobby”.
So his appointment as the industry’s top watchdog might have been expected to leave bankers quaking in their boots. But instead, they are relieved.
Bailey has managed to tread that awkward line between unwelcome reform and keeping the industry on-side. He listens, bankers say, and brings a pragmatic sensibility to discussions, rather than the Governor’s anti-bank ideology.
With the Bank’s biggest challenges ahead, not least the integration of the FSA, Bailey’s going to need all the diplomacy he can muster.