Beyond Prudhoe: Why BP should go back to being an oil company
Forget the good guy image. BP's recent history of mismanagement tells us it needs to focus on running its oil business.
By Cait Murphy, Fortune assistant managing editor

(Fortune) -- Since 2000, BP has sought to brand itself as the nice guy of Big Oil, touting its investments in renewable energies and commitment to the environment, complete with a cute little sunflower-ish logo. However improbable or even absurd it was for the world's second-largest oil company to adopt "Beyond Petroleum" as a slogan (Fortune cast a skeptical eye at the effort in 2002) to a large extent, the strategy worked. Last year alone, BP was named the Financial Times "most respected energy company" and Fortune's "most admired company in Britain." Business Week ranked it the second-greenest company of the decade (after du Pont). "They have nailed their colors very firmly to the environmental mast," Patrick Barrow, managing director of the Public Relations Consultants Association, told Fortune last year. Those colors are fading fast.

Last week, the company was forced to shut down its largest U.S. oil field, in Prudhoe Bay, Alaska, because of corroded pipelines. That was bad enough, but then it turned out that BP had been warned back in 2004 of potential problems. Worse, some of the pipelines had not been cleaned since before Bill Clinton was president. One effort to do so was abandoned because there was too much sediment; in other words, the company failed to clean it because it was too dirty.

Neil Dunn, with BP, left, talks to Alaska Governor Frank Murkowski as he explains the steps being taken to clean up a leak from an oil transit line at the Prudhoe Bay oil field on Alaska's North Slope.

The Prudhoe Bay fiasco comes on the heels of a long string of miscues and blunders. Consider:

  • The Thunder Horse platform, damaged in last year's hurricanes, will not be reopened until 2007 at the earliest, much later than originally forecast.
  • In June, the federal government charged Houston-based BP traders of manipulating the price of propane in the Midwest and northeast in 2004.
  • In April, BP was fined by the Department of Labor for unsafe operations in an Ohio refinery.
  • In March, corrosion in a Prudhoe Bay pipeline caused a leak of more than 200,000 gallons of crude.
  • Worst of all was Texas City, the site of one of the country¹s largest refineries. A fire in March 2005 killed 15 workers and injured 170 more. In its investigation, federal regulators called the tragedy "completely preventable" and questioned BP's entire safety culture.

The Department of Labor found more than 300 safety violations, and the Department of Justice is looking into the possibility of criminal charges. BP conceded in its own report that Texas City was a disaster waiting to happen: "Over the years, the working environment had eroded to one characterized by resistance to change, and lacking of trust, motivation, and a sense of purpose."

This list could go on, but the point is clear: This is not the stuff of which most admired companies are made. And no, these problems cannot be shrugged off as the kind of isolated incidents that are bound to crop up in a $255 billion global company. The U.S. accounts for more than a third of BP's assets and staff; it is not a marginal market, nor an unsophisticated one. And yet in the last 18 months, BP has suffered serious breakdowns in exploration, refining and pipelines - the heart of what it does.

It's too soon to know what has been going wrong and why, but it's worth pointing out that when it comes to corporate social responsibility, the first duty of any oil company is to run its oil operations to a high standard. And in this BP has fallen far short of the mark in the U.S. The costs are high; billions in improvements and claims at Texas City, for a start, and more than a $1 million a day in lost profits from Prudhoe Bay. There may also be consequences when it comes to future project approvals. BP's good-guy image has to be tarnished.

As a slogan, Beyond Petroleum was always beyond precious. Instead of trying to be the non-oil oil major, BP would be better served by trading in the sunflower ethos for a steely-eyed rigor in running its core business. Because in the end, the best thing it can do for the environment is to be a good oil company, not to pretend it is something else. "Our commitment to responsibility has to be expressed not in words, but in the actions of the business, day-in and day-out, in every piece of activity and every aspect of behavior," CEO John Browne (the world's sixth most-admired CEO, according to the Economist Intelligence Unit) told the London Business School last year.

That is exactly right - and exactly what BP has been getting wrong. Top of page