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Last Updated: Thursday, 11 October 2007, 20:18 GMT 21:18 UK
BP chief unveils radical overhaul
BP petrol station
BP's new boss is under a lot of pressure to revive the troubled firm
BP is set for a dramatic makeover designed to restore the oil giant's competitive position after three years of falling profits and safety woes.

Under radical plans outlined by BP's new chief executive, Tony Hayward, management layers will be stripped out and business units consolidated.

Consistent procedures for developing oil and gas fields have already been introduced, the firm said.

The changes will include job cuts, but it was not made clear how many.

It comes five months after Mr Hayward replaced Lord Browne at the helm of BP and is likely to raise questions over the management expertise of the once feted former chief executive.

Lord Browne was forced to resign over a scandal regarding his personal life in May.


Under the wide-reaching restructuring agenda, the number of layers of management would be reduced from 11 to seven and the number of business units the company is divided into would be cut from three to two.

BP's performance has materially lagged our peer group in the last three years
BP boss Tony Hayward

This would see the company incorporating its gas, power and renewables division into its two remaining segments - exploration and production and refining and marketing.

A separate division will be created to handle BP's low carbon business and future growth options outside oil and gas.

Mr Hayward said the changes represent a " fundamental shift" in the way BP works.

He blamed lack of consistency, excess organisational complexities and "unacceptably high overhead costs" for the company's recent troubles, which has hit profits despite record oil and petrol prices.

These have included delays to new projects, a fatal explosion at its key Texas City refinery and oil pipeline leaks in Prudhoe Bay, Alaska, which led to the largest oil field in the US being partially shut down.

"BP's performance has materially lagged our peer group in the last three years," My Hayward said.

"It has been poor because we are not consistent and our organisation has grown too complex. At the root of all this is a need to change our behaviours."

Four layers of management to be stripped out
Job cuts
Business units consolidated
Standardised processes, including safety, introduced

He said his priorities were safety, where good progress had been made, deployment of "the right skills in the right places" and turning around the company's flagging financial performance.

He admitted that under these plans redundancies would be inevitable but insisted that front-line operations would be strengthened.

Long-term benefits?

Mr Hayward said that the changes would yield some medium-term cost reductions, but the major benefit "would be the revenue boost expected from greatly improved operational efficiency over the longer term".

Analysts called the measures a step in the right direction, but would not have much effect on the London-based firm's forthcoming third-quarter results, out later in October and expected to be poor.

"In our view the changes are about better efficiency, and the upside should come from better revenue growth," said JP Morgan analysts in a note.

Mr Hayward said that BP's revival would begin before the end of the year as fourth-quarter earnings benefit from major new production coming on stream and refinery volumes at Texas City and Whiting increasing.

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